Investors came to share their ideas at the 19th Annual Sohn Investment Conference on Monday. Many prominent investors from top hedge funds spoke including Chris Shumway from Tiger Cub, Jeff Gundlach from DoubleLine, and Larry Robbins from Glenview Capital.
When Shumway mentioned his long position in Moody’s Corporation (MCO), the stock immediately rallied 1.25 percent, reported Business Insider.
Following Shumway, Gundlach suggested that homebuilder stocks were overvalued. Homebuilder stocks such as Lennar (LEN) immediately tanked 0.6 percent and moved lower in the afternoon.
Around 2:15 p.m., Robbins revealed his long positions in Humana (HUM), WellPoint (WLP) and Monsanto (MON). All three stocks saw minor rallies of around 0.5 percent at a time when the overall market showed no movement.
How safe is this advice for individual investors to follow? In the month of April, over 75 percent of the leading hedge funds produced a negative return, according to Zero Hedge.
For the individual investors, it is extremely important to take a look at where these stocks are coming from. Selling homebuilder stocks might seem like a great trade for Gundlach because he is already in the trade and is now adding to a winner. The situation is quite different for the individual investor—there is now less room to maneuver.
LEN, for example, has already tanked 10 percent from its peak in February. If the individual investor opens a short position in LEN down here, there is a good chance he will be stopped out on any sort of relief rally or short covering.
Zero Hedge believes that Duke economics professor, Dan Ariely, gave the best advice of all: “We should be careful about the quality of advice we get when we have trouble evaluating it.”