"Revshark" DePorre: Now a hedge fund manager?

Discussion in 'Wall St. News' started by Butterball, Jan 18, 2007.

  1. Butterball


    You gotta be kidding me. First Ron Insana, now DePorre. Who's next? Maria Bartiromo?


    Attacking the market: Local hedge fund aggressively pursues, executes trades

    Jan 09, 2007 (The Bradenton Herald - McClatchy-Tribune Business News via COMTEX) -- BRADENTON -- James "Rev Shark" DePorre and Quint Tatro attentively watch a row of double-stacked, large-screen monitors displaying real-time technical charts for stocks and commodities.

    It merely looks like a bunch of squiggly lines to the layperson, but DePorre and Tatro, who run a local hedge fund called Shark Asset Management, are finding deep meaning in these digitally displayed peaks and valleys.

    And they have about $10 million riding on their thesis.

    Oil is dropping, which should make consumers happy and stimulate stock prices, they maintain.

    Yet the opposite is happening. Stocks that should gain momentum on falling crude prices are stagnating or losing ground.

    Occasionally, DePorre and Tatro's eyes dart to a nearby TV tuned to the CNBC business channel inside their Village Green Parkway offices.

    "Ah, there's a little meltdown going on here," DePorre posits, noticing the Dow Jones Industrial Average dropping while the NASDAQ continues an upward move.

    DePorre and Tatro believe a correction is coming and the market is about to stumble. They have bet $10 million that stock prices will drop -- a trading strategy known as "shorting."

    The next day, Jan. 5, their theory paid off.

    After dropping more than 100 points throughout the day, the Dow closed down 82 points. The NASDAQ also ended the day with a nearly 20-point decline.

    Once they cash out of their shorting run, DePorre and Tatro will likely have reaped a handsome reward for their 30 or so investors, each of whom must have a net worth of $1.5 million to be eligible to invest in the hedge fund.

    But DePorre and Tatro's shorting strategy could have just as easily worked against them, leaving them with substantial losses if their theory didn't pan out.

    Welcome to the fast-paced, buy-and-sell world of the hedge fund -- an investment vehicle that has garnered both praise and condemnation from the financial world.

    "Buy and hold," the mantra of many financial advisers, doesn't command much attention here.

    Sure, there are the occasional stocks DePorre and Tatro keep in the hedge fund for a year or more.

    But mostly they trade aggressively and fast -- like a shark feeding on the chum of undervalued companies that show promise for sharp increases.

    "We don't try to suck the last drop of profit out of them, but we try to catch the bulk of the move," DePorre says.

    In exchange for their wisdom and investing prowess, DePorre and Tatro charge investors a 1 percent base fee on the total amount of their investment and a 20 percent cut of profits.

    DePorre, president of Shark Asset Management, is a 50-year-old former lawyer who began trading stocks online in the early 1990s when he began using the Internet as a means of communication after he lost his hearing to a genetic condition.

    Today, he runs the hedge fund, which he started last year, and also writes a column for an investing Web site, TheStreet.com.

    Tatro, vice president of Shark Asset Management, is a former investment adviser who has been a contributing columnist to the Louisville Business Journal.

    Aggressive though they may be, DePorre and Tatro wince at the notion they are day-traders.

    "But our opinions (on stocks) could change quickly," Tatro, 29, clarifies.

    DePorre and Tatro say they can't talk specifics about how their hedge fund has performed because that crosses the line of advertising, a no-no as determined by the Securities and Exchange Commission.

    But the two offer another fee-based service, the Sharkfolio, which allows investors to witness DePorre and Tatro's active trading online for $79.95 a month.

    That fund returned 39.6 percent last year, they say. Most investors consider themselves lucky to achieve annual returns commensurate with the Standard and Poor's 500 Index average annual return rate of 11 percent.

    For more conservative investors, the duo offer Shark Large Cap, a service modeled after the Sharkfolio that tracks large capitalization stocks that are typically less volatile. That service runs $39.95 a month.

    Shark Asset Management also offers a service called Shark Sector Timing, which launched in the fourth quarter of 2006.

    The service partners Shark Asset Management with an investor's traditional financial adviser to manage a take-out portion of the client's portfolio.

    Shark Sector Timing delivered a 5.2 percent return for the fourth quarter. That return lagged the S&P 500 Index, which posted a 6.17 percent return for the same period.

    Hedge funds have garnered their share of negative press.

    A Forbes cover story in 2004 examined the investment vehicles under the headline, "The Sleaziest Show On Earth."

    The article explored the lack of regulation and exorbitant fees in the hedge fund industry and profiled unwary investors who had plunked their money into hedge funds that used inflated or entirely made-up returns to draw new money.

    Hedge fund Amaranth Advisors rocked Wall Street last year when it announced it lost more than $3 billion in a bad bet on natural gas.

    But Tatro says such stories represent the worst of hedge funds, many of which can be as conservative and safe as more traditional investment vehicles. Investors must do their homework before putting money in a hedge fund, he says.

    "The people who are leery are those who don't understand them," Tatro says. "Hedge funds that the guy takes off and goes to the Bahamas, the person (investing) did not do their homework."

    Michael Ohlman, a certified financial planner and wealth management specialist with Raymond James in Lakewood Ranch, agrees that hedge funds sometimes get an undeserved bad reputation.

    "It's become a generic term for unregistered investments," said Ohlman, who was unfamiliar with Shark Asset Management. "And it's become so broad that a few bad apples have tainted what is an essential strategy for those it's appropriate for."

    Ohlman said his firm does occasionally provide hedge fund opportunities to its clients.

    "We do have a group out of St. Petersburg which we refer to as the noncorrelated investment division and their job is to go out and find the managers of the best noncorrelated investments -- hedge funds being a part of that," Ohlman said.

    Applied properly, and for the investor who has enough net worth to sustain potential losses, hedge funds are an effective way to diversify a portfolio, Ohlman said.

    "Diversification is an essential tool to investment success," Ohlman said. "The good news about diversification is that not all your money is moving in the same direction at the same time. The bad news is you're always going to be losing money somewhere. Hedging is a diversification tool.

    "The folks that have gotten into trouble went from trying to hedge in a long position in a market to making bets with people's money. If they make a bet and they hit a home run, they get paid very handsomely. If they don't, you lose your money."
  2. What could be better? Writing a column and talking your smallcap book.

    Sounds like Jim Cramer Jr!