Harris Kupperman’s Praetorian Capital seeks out hysteria in every corner of the market, from bitcoin to natural gas.
Occasionally the best seed capital for a successful career in investing is lucky timing. In 1997, as a junior in high school, Harris Kupperman began obsessing over the stock market as the Asian financial crisis and then dot-com mania dominated the headlines. By the time he arrived at Tulane University two years later, tech stocks had soared nearly 200% since Netscape’s IPO in the summer of 1995 and would double again over the next few months. The future hedge fund manager noticed that many of these dot-coms ultimately crashed when VC lockups expired and early investors dumped their shares.
In early 2000, Kupperman, known to his friends and peers as “Kuppy,” took the $6,000 he had earned over the summer cleaning pools on the North Shore of Long Island and began buying put options—effectively shorting the stocks—of dot-bombs like Commerce One and Foundry Networks. When the bubble popped in March 2000 and the Nasdaq fell 80%, he made a small fortune.
“I had a few thousand dollars in my account at the beginning of the year, and at the end of the year I had a few hundred thousand,” boasts Kupperman, who is now 41. “It opened my eyes to the potential that if you think harder than the other guy, you can make a lot of money.”
Two decades later, his Praetorian Capital has $180 million under management and is up 593%, net of a 20% performance fee and 1.25% management fee since it began taking in outside capital in 2019. During both 2020 and 2021, his fund, which makes concentrated bets in only about a dozen investments, returned more than 100%.
Kupperman is a go-anywhere, event-driven investor who expects a fivefold return on his positions. He’s not afraid to trade manias even if he thinks they have no intrinsic value. In late 2020 and early ’21, for example, he made a sixfold profit in bitcoin.
“It’s a Ponzi scheme. It has no real function,” he says. “But there are moments in time when investing in Ponzi schemes is perfectly good. When they’re inflating, they’re very profitable to own.”
He believes bitcoin rises when the Fed injects liquidity into the market, as it did in the early days of the pandemic, and sinks when the central bank tightens. He bought bitcoin at about $9,200 in the summer of 2020, and by the end of that year the cryptocurrency was the largest position in his portfolio. In March and April 2021, as inflation began breaching the Fed’s stated 2% goal, Kupperman decided the central bank’s easy-money policies had run their course, so he cashed out when bitcoin traded at $58,000, a few months before it peaked at close to $70,000. (It currently trades around $20,000.)
Other opportunistic pandemic buys were small-cap natural gas and firearm stocks. Today he’s bullish on housing, rising interest rates be damned, in places like Florida, which continue to attract residents leaving high-tax states.
“About every 18 to 24 months, one industry freaks out and you get to buy one industry cheap,” Kupperman says. “That’s the story of my life. I’m patient—I wait until they completely lose their minds and then buy it.”
Kupperman graduated from Tulane in 2003 with a degree in history, opened a hedge fund and moved to Miami. His fund did reasonably well, but in the wake of the financial crisis of 2008, he shuttered it.
In 2010 he became convinced that copper- and coal-rich Mongolia would boom, so he took control of a dormant shell company trading in Canada, rechristened it Mongolia Growth Group and began investing in real estate in Ulaanbaatar. Unfortunately, soon after Mongolia Growth Group opened its offices in 2011, the country’s government began to restrict foreign investment, and its economic growth slowed to a crawl. Today the bulk of Mongolia Growth Group’s $2.5 million in revenue comes from a data-driven newsletter called Kuppy’s Event Driven Monitor, which has nothing to do with Mongolia and costs $400 per month.
In 2019, he relaunched Praetorian with Wes Cooper, an Ernst & Young alum, using mostly their own money. Their biggest positions today include physical uranium, which has endured a 14-year bear market, and crude oil.
Energy’s outperformance has helped Praetorian keep rising this year, up 9.1% through July compared to the S&P 500’s 13.3% decline. But rising interest rates have hurt his stakes in housing stocks like The St. Joe Company, one of his top positions since the fall of 2020 (see “Kuppy’s Cart,” above). St. Joe owns 170,000 acres in the Florida Panhandle, and its revenue grew by 66% in 2021. Shares tripled from $20 to $60 between September 2020 and April 2022 but have since retreated to $37.
“Everyone’s freaking out about interest rates and mortgages,” Kupperman says. “I don’t think it’s going to change anything. In a year, interest rates will go down, but people from New York will keep coming to Florida.”
Kupperman may be a Florida real estate bull, but he’s already moved Praetorian’s operations to beachfront Rincón, Puerto Rico, which is even more tax-friendly. He’s mulling closing his fund when it hits $250 million in assets. “I have friends that run billions, and they have more money than me,” he says, “but I can’t spend all the money I’ve made already in my career.”
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Source: https://www.forbes.com/sites/hanktucker/2022/09/21/irrational-exuberance/