In the current bear market, selling for non-fundamental reasons can often provide an opportunity to buy a bargain.
This past week, Melvin Capital, an embattled $7 billion hedge fund, announced it’s closing down after steep losses over the past year and a half. Recall, Melvin was the prime target of a short-squeeze in GameStop (GME) and a handful of other stocks they were known to be short.
Melvin Capital ran a concentrated portfolio and was the top holder in several companies. These positions have been liquidated in the past month in anticipation of closing the fund. The selling in their list of stocks into an already weak market has exacerbated the downdraft in those names.
Sifting through Melvin’s portfolio for a buying opportunity uncovers Coty (COTY) , the multinational beauty company. The soon-to-be-defunct hedge fund owned 48.7 million shares earlier in the year, almost a 6% stake. Coty’s shares are