Episode #1

Hedging Alpha 🥷🏼

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Story of the week:

Super Micro is a fraud!? 🚔

Super Micro - a company that builds Nvidia-based server clusters and thus profits daily from the AI hype - at least it did. 2000% appreciation in 2 years. More than Nvidia itself. Revenues doubled in the last three quarters. In March, the highlight: inclusion in the S&P 500. What sounds like a great success story is turning into a nightmare for some investors. Since peaking in March, the stock has lost 75% of its value to date. On top of that, the stock is in danger of being delisted by the Nasdaq. So what happened?

It all started on August 28: Super Micro failed to file its annual report with the SEC on time. On top of that, short seller Hindenburg Research accused the company of accounting fraud, causing the stock to plummet 19%. The Nasdaq then gave Super Mirco 60 days to file its annual report or face delisting. The deadline is mid-November. The next piece of bad news for investors followed on Wednesday: the auditor Ernst & Young (EY) is resigning from its mandate - the share price fell by a total of 45% on Wednesday and Thursday.

So what happens now? Super Micro announced that it will give an outlook for the first quarter of 2025 - the catch: without an auditor and on the day of the presidential elections on November 5th. In any case, this gives a strange gut feeling.

The story reminds me strongly of the German company Wirecard - the course of events is almost identical. Time will tell if Super Micro really is a fraudulent company and has committed accounting fraud.

The question that many hedge funds will now be asking is: will Super Micro turn around or will the stock go even lower? Could the stock be a short opportunity? I will look into this question myself in the next few days - if there are any changes in the α portfolio, you will know.

As a private investor, I would definitely stay away from the stock. Those who have not yet done so should do so as soon as possible. Because even if the turnaround is successful, I think the chances of the stock returning to its old levels are very slim.

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What else happened this week:

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Markets

Most important figures of the week:

Big-tech earnings:

This week Microsoft, Meta, Amazon and Apple reported earnings. While Amazon managed to exceed the analysts' expectations, resulting in a 6% rise of the $AMZN stock, the week started rough. Despite beating EPS and revenue expectations, $MSFT and $META declined 6.5% and 4.5% on Thursday. Apple followed with mixed earnings, beating revenue expectations but missing on EPS. The stock lost 1% on Friday.
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Non-farm payrolls:
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The US economy adds 12,000 jobs in October, significantly below expectations of 106,000. The unemployment rate was 4.1%, in-line with expectations of 4.1%. This marks the lowest number of US jobs added since July 2021. All signs continue to point toward a weaker labor market.

Top movers:

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Chart of the week:

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Winner of the week:

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Loser of the week:

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Meme of the week: