Momo Stocks In Turmoil As Patron Saint Of Momentum Investing Calls It Quits

Over the years many have wondered how it was possible that a hedge fund could exist that did nothing more than ride momentum and heatmaps higher or lower without almost any insight into the fundamentals of the underlying corporations. That hedge funds, of course, is John A. Thaler’s JAT Capital, which did nothing but buy the most talked about, “storied” momo stocks and ride them higher. Or lower, as the case may be. Because the hedge fund which only managed $3.7 billion as of March 31 just because it was a Tiger Management spin off, is no more.

As Reuters reported last week, the days for momo chasers are now over, as presaged by the passing of their patron saint, JAT which is returning cash to outside investors and is doing the Point72 thing where what little money it will have left will be used to manage Thaler’s own personal assets.

From Reuters:

Hedge fund JAT Capital Management is returning money to outside investors to restructure itself as a family office, a person familiar with the $1.7 billion firm said on Tuesday.


JAT, founded in 2007 by John Thaler, had become an industry darling after posting a 20 percent gain in 2009.


But it faced tougher times more recently, posting double-digit losses in 2012 and 2014.


Thaler, who focused on telecommunications, media and technology stocks, told investors this was the “right moment to take a break.”

JAT’s passing had been long expected but was only realized now due to the rangebound nature of the S&P for the past 6 months or ever since the end of QE3 where the stock market has gone largely nowhere, landing a deathly blow to all those whose only skill is to buy and pray.

In any case, with JAT out, a countless number of copycat investors are sure to exit stage left, as the sun finally sets on one of the most moronic trading strategies (alternatively, if you disagree, just pay your Ameritrade broker’s heatmap app $5.99 a trade to just buy whatever is most green and short whatever is most red on any intraday heatmap and achieve the same results).

Worse, now that JAT has become an major overhang for virtually every momo stock in the US market, expect the following Thaler holdings as reported on the company’s latest 13-F to do ungood to quite ungood in the coming days and weeks as any (momentum of course) ramp is met with liquidation selling by the soon to be family office.