Cable Car Capital’s Q2 2015 letter is out. The Cable Car Composite returned +22.7% net of fees in the second quarter of 2015, bringing year-to-date returns to +37.4%. The MSCI ACWI rose +0.3% during Q2.
See the full letter from Cable Car below
Cable Car Capital LLC Q2 2015 Letter
I am pleased to report an extraordinary second quarter of 2015. The Cable Car Composite returned +22.7% net of fees, with significant contributions from both long and short positions.
With two higher-profile short positions in the news recently, I’ll do things a little differently this quarter and start with a discussion of Cable Car’s recent activism on the short side, followed by performance reporting and attribution.
As regular readers know, in May I published a twelve-part short thesis on Plus500 (PLUS LN), a UK-listed contract for difference broker. The impact was above and beyond my expectations; Cable Car may perhaps now be better known in the UK than in the US. Thanks to media coverage, shares were briefly halted after the initial report, and the analysis has been well-received within the investment community. I will provide an update on PLUS in a moment, but first I want to thank many of you for your words of encouragement. It has been a heady last few months, and I feel fortunate for the many productive conversations and new relationships that have arisen out of the publicity. While I still have some reservations about disclosing short positions, I appreciate the attention and opportunity it created to connect with all of you.
For those who are new to Cable Car, a few words about my philosophy on publicity may be in order. Although I use the word activism to describe some of my work, I hope to avoid the label of ‘activist investor.’ The bulk of Cable Car’s investment activity is and will remain passive security selection based on potential return on capital and the belief that other market participants will eventually come to similar investment conclusions. That said, I have written before about the benefits of ‘soft activism’ – publishing a detailed, accurate, and original research report, long or short, can sometimes accelerate price discovery and improve an investment’s internal rate of return. The Internet makes it easy to share opinions, and I intend to continue sharing mine when I believe I can help correct misinformation in the marketplace or persuade others of my point of view.
As a partial owner of a business, I believe it would be irresponsible not to communicate with management when opportunities for value creation become apparent. However, Cable Car is unlikely to follow the traditional model of activist investing and noisily agitate for change at its portfolio companies. I am more inclined to sell a mismanaged company short than buy shares hoping to effect change without a control position. For example, an activist recently published an angry letter to the Board of Directors of a company Cable Car is short; in the letter, they surprised me by publicly articulating several aspects of my own short thesis: management has materially misrepresented the liquidity position of the business, engaged in self-dealing, and entrenched itself through poor corporate governance.
Cable Car Capital ful letter below in PDF