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Sanborn Kilcollin Partners co-founder Robert Sanborn on strategies for taking a short position in stocks.
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-- right.
Five years ago had you thrown a chunk of money in a simple index fund on auto pilot.
Be doing pretty darn welcomes the market is at near five year highs what's the play with stocks -- the five year -- now should it now involved.
A pilot an active manager my next guest is one he's a hedge fund manager who says yes -- view in the past has been.
But the -- portfolio has twenty long at twenty short positions carefully picked up right now.
He's so bullish she's got ninety long.
And forty short.
Saying he's shorting the quote beta and momentum plays and going long for the steady -- Roberts and board -- -- kill column partners co-founder joining me now on a Fox Business exclusive first Chicago.
-- he -- vs much of a fewer shorts here what why so bullish.
Well that that's pretty much our standard positions.
-- We tend to be -- long 4050 short we have a long bias and our structural -- characteristic for the fund.
What do you see you right now for all of those names such -- long.
Well it's it's it's it's it's it's a complicated market stocks are very I think qualitatively and expensive based on.
Interest rates especially however we don't.
The market is is understandably pricing and a lot of macro tail risk into the market.
So we don't believe the market should trade at that the valuations that or imply -- today's interest rates.
And we believe that.
The macro scene is such that ultimately the political class -- -- only.
Make a huge error here in Libya crisis.
And the risk is still very high in the marketplace but still individual stocks are you can find some very briefly price individual stocks -- You're -- and you're calling those the steady -- that the Vanilla trade further the chocolate -- cookie -- returns we certainly hope but let's talk about what you look for.
I'll -- this on -- side now and start with the shorts what do you look for when you're deciding which means to short.
Well we knew we were pretty simple on both side as we look for undervalued longs and overvalued shorts we look to hold them for a very long period of time.
For five years we have very low turnover and we tend to be in the in the waiting process the market in the short run is a beauty pageant in the long run that -- weighing process we focus entirely on the weighing process.
And we believe say if you don't have -- at two times revenues and nine times ebitda.
And your short say.
Lululemon at.
Say ten times revenues and you know a much -- higher multiple levee -- then you're gonna do very well on the long one as those prices find their true intrinsic dot com.
Let me just say on our screen are the names at least some of them that you're shorting right now eBay panera breads chipotle Michael course which is done beautifully don't get that but Amazon I guess because.
The PE ratio what a hundred it's trading at a 180 times earnings but anybody who was tried to short the stock in the past over the long term.
Has failed miserably Robert I mean it's done extraordinarily well.
It definitely has -- -- -- don't know if we like to make money and all our investments however we look at the portfolio realistically as a whole and owning some of the shorts allows us to own moral law along the way otherwise would so.
We look look at it Amazon as a very expensive stock -- compared to our what we think is are undervalued longs over time we think as those.
Various stocks find their true intrinsic value we will add alpha to the portfolio.
Let's show those -- and some of them in here Apache Microsoft.
Pepsi YouTube like some of these names as well.
Pfizer is is one -- -- feel very confident about up obviously these are as you say.
Real steady at -- My question she was this when I look at -- annualized returns over one year -- up just three quarters of a point.
Definitely not beating the market over three years up a quarter of a percent.
Definitely not beating the markets what and yet I am paying you a fee of about 1% plus 20% as I believe of the portfolio.
To tell me now why -- convince me to pay somebody like you to be running my money.
Well we think that the with a much longer the record the more relevant the record and and I would even say one or three year record as fairly short term -- I've been managing money.
I've been managing money for over twenty years I'm very proud of my long term record.
And that is all I really care about so.
-- a mile long term market both in my mutual fund days in the and then this hedge fund or something -- for is something I'm proud about and I pretty much honestly shrug off -- -- a year or two.
And stick with the program.
Because I have found that this investing.
Approach is fairly self correct.
Well again we we do believe in the long long term definitely -- a bit.
It's burned some people Robert nice to have you thank you for coming on.
And we'll put your stock picks both long and short on the FaceBook dot com slash Liz claimant -- -- imports -- kept Colin partners co-founder thank you closing bell.
