How Chanos Made the Big Bucks

by StockJockey

Monday, November 17, 2008 - 3:39 am

Jim Chanos will post among the best numbers in Hedgistan this year; no surprise there given his short bias.

The more argumentative amongst us might even argue that his 50% gains are merely in line with the declines we have seen this year, that theory sells Chanos’ talents short. He had a good year, and the New York Post has the story.

If you were wondering how he did it, read up. It was not exactly as I had thought....

Chanos, readers of The Post learned last week, has posted a 53.2 percent increase through Oct. 31 for his $5 billion short-only Ursus fund.

The 50-year-old Chanos said last week that he posted the gains by shorting “all of the satellite and most of the cable companies” but would say no more.

So On the Money did a little digging and came up with the exact stocks Chanos has ridden to great success this year.

Time Warner Cable, Viacom, Cablevision, Carmike Cinemas and Dish Network - stocks that have lost at least half their value since he set up the trade - have been money in the bank for Chanos, according to investors in the fund.

Ironically, recent market volatility, a friend of a short seller, wasn’t the key to Chanos taking profit in this year’s trades - instead it was strategic planning set up years ago. He first touted his visionary investment strategy, which he calls “The Twilight of the Gatekeepers,” at an investor presentation he gave in New York in late 2005. He said cable and satellite companies would lose their lock on revenue from programmers as the Internet would open a gateway for networks to send their shows straight to peoples’ computers and bypass the fees paid to the cable guys.

Chanos’ bearish trade on large chain movie theaters proved profitable because he predicted we would see demand fall as people moved to fancy home theaters and faster distribution of films through alternative means, like On-Demand movies. One such bet against Carmike Cinemas earned him a whopping 90 per cent return when the stock slid below $3 in October. New York Post

This is the second time in a decade Carmike Cinemas has imploded-if it goes into bankruptcy and eventually emerges again as a public company again, well you will know what to do.

CHANOS’ RIDE TO BIG GAIN
New York Post
--------------------------------------------------------------------------------------------------------------
The content contained represent the opinions of 1440 Wall Street. This commentary in no way constitutes a solicitation of business or investment advice. It is intended solely for the entertainment of the reader, and the author. No Position