When it comes to the best trades of all time, short positions usually steal all the glory. Short trades garner attention because they are usually against the norm, extremely risky, and often harder to execute due to the complicated nature of shorting an asset.
Yet, that’s not to say that Wall Street hasn’t experienced a small handful of spectacular long trades in its history. These five investors have become iconic--and extremely wealthy--by going long.
John Paulson’s Big Bet on Recovery
Paulson is a hedge fund manager best known for betting against subprime mortgages in 2007, one of the most profitable trades of all-time. However, this notorious short overshadowed Paulson’s outstanding long trade.
Many investors feared a second great depression as the Dow approached 6,500 in 2009, but Paulson wasn’t afraid to change courses despite his prolonged market bearishness. Paulson turned bullish on stocks and commodities, particularly banks and precious metals. The post-recession bounce in equities earned Paulson $5 billion dollars for his hedge fund.
Paulson has lost money recently on bank stocks, the potentially fraudulent Chinese company Sino-Forest, and gold’s (GLD) recent decline. However, Paulson is still regarded as an investment wizard. His hedge fund shattered return records for several years.
Andrew Hall’s $100 Million Haul
Hall established himself as a legendary commodities trader in the 2000s when he placed big bets on oil. He went all-in in 2007 and early 2008, correctly predicting crude oil’s meteoric rise before the recession. Crude approached $150 per barrel in 2008, netting Hall $100 million in a single year.
Unfortunately, the timing of Hall’s trade could not have been worse. Hall worked for Citigroup (C), the same bank with which he placed his trades. When it came time for Citigroup to pay Hall, the bank had to be bailed out by the government, a poor time for Hall to come knocking on the bank’s doors for money. Eventually, Hall got his money after a long dispute.
Hall left Citigroup that same year to become CEO of Occidental Petroleum’s (OXY) commodity trading unit. He also manages hedge fund Astenbeck Capital and remains one of the top commodities experts in the country.
David Tepper Goes Long Financials
With impeccable timing and experience in distressed assets, Tepper made one of the best trades of the recession. He went long financials such as Citigroup and Bank of America (BAC) near the bottom of the recession in 2009, earning his fund enormous returns on both positions.
Tepper reportedly made $7 billion for his fund, taking home $4 billion himself. His risky investment could have gone bust with one wrong economic turn or political decision, but his calculated calmness paid off.
Louis Bacon Predicts Invasion of Kuwait
With tensions rising between then-Iraqi President Saddam Hussein and Kuwait, Bacon correctly predicted Hussein’s invasion and ensuing war between Iraq and over a dozen coalition forces, including the United States and Kuwait.
With a significant amount of the world’s oil supply paralyzed, oil spiked and stocks plunged. Bacon correctly played the action in both, earning his fund a 115% gain. Bacon also gained notoriety in the investment world, attracting investors from all over. In 2012, his fund Moore Global was worth $6 billion after he returned $2 billion to investors.
Dan Loeb Joins the Herbalife battle
Billionaire investors Carl Icahn and Bill Ackman went long and short, respectively, on Herbalife (HLF) stock. Ackman has a $0 price target on the stock and laid out in a 110-slide presentation why the stock is a pyramid scheme. Icahn, a famous activist investor, went long on the stock and the two engaged in a heated debate about their opposite position live on CNBC – an epic exchange that all but stopped trading at the New York Stock Exchange.
Dan Loeb, another activist investor teamed up with Icahn in his crusade to destroy Ackman. Loeb bought the stock around $28 per share when the public first reacted to Ackman’s $1 billion short bet, sending shares into a selling frenzy. Loeb gobbled up shares and slapped a $55 to $70 price target on the stock. He took profits at $44, drawing criticism about whether he was riding Icahn’s long position and taking advantage of Ackman's vulnerability. Yet, nothing about Loeb’s Herbalife trade was illegal. He invested $350 million in the company, earning him almost $200 million in profits in about two week's time.
Got a better trade that can top these five? Share it in the comments!
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