Gabe Plotkin, investment director and portfolio manager of Melvin Capital Management LP, speaks during the Sohn Investment Conference in New York, May 6, 2019.
Alex Flynn | Bloomberg | Getty Images
The speculative fund in the GameStop saga center gained more than 20% in February, recovering some of its losses from a brutal January, CNBC sources told Leslie Picker.
Melvin Capital, which previously had a high bet against the video game retailer, recorded a 21.7% return in February, according to sources. The fund fell 53 percent in January during a dramatic shortening that boosted GameStop and other stocks.
The company said in late January that it had closed its GameStop shorts as the stock grew. Melvin’s founder, Gabe Plotkin, was one of the people brought to testify before Congress about the volatile market movements, along with Ken Griffin of the Citadel and retailer Keith Gill.
Melvin received new investments in his fund during the turmoil, with Citadel and Point Co72 by Steve Cohen injecting $ 3 billion.
Plotkin’s hedge fund, like many others, will go against a company. Short selling is a strategy in which investors borrow shares of a stock at a certain price, in the hope that the market value will fall below that level when it is time to pay for the borrowed shares.
The high level of short positions in some stocks, including GameStop, was noticed by traders on social networking sites, such as Reddit’s WallStreetBets forum.
An increase in purchases in GameStop and other names has triggered short leaks, which is the phenomenon that occurs when missing sellers buy shares to cover their positions, forcing even higher prices. The price of GameStop shares went from under $ 20 to almost $ 500 at one point, before falling sharply.
Plotkin told the House Financial Services Committee on Monday that missing sellers may have to change their strategies after retailers appear to be triggering a dramatic rise for some of their main targets.
“I think at Melvin, we’re going to adapt, and I think the whole industry is going to have to adapt,” Plotkin said.
Melvin Capital declined to comment to CNBC.
– CNBC’s Kevin Stankiewicz contributed to this story.