‘I didn’t really touch oil’: The sectors new day-trader Dave Portnoy deems too risky to invest in
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Dave Portnoy has shot to prominence in financial market circles in recent weeks as the face of the day-trading boom, making big, loud statements about how easy investing is, how washed up Warren Buffett is, and how billionaires criticising him are just jealous.
But behind the bombastic videos, there exists a level of risk aversion stopping the founder of Barstool Sports from investing in certain sectors, Business Insider found out in an interview with Portnoy last week.
The sports bettor turned investor turned to day trading when the novelty coronavirus pandemic brought sporting events to a halt.
The fact that Portnoy is reluctant to invest in certain sectors may come as a surprise to his 1.5 million Twitter followers, who usually get to watch videos of him touting hefty gains and a risk-taking attitude.
Portnoy has invested in Hertz, despite the overwhelming odds that shareholders will be wiped out during bankruptcy proceedings and in airlines despite them facing a spate of brutal sell-offs since the pandemic brought all forms of travel to a halt.
He has criticised Warren Buffett several times for what he believes was a premature sale of airline stocks by the “Oracle of Omaha”.
But despite this, in an exclusive interview via Zoom, Portnoy said that oil, movie theatres and cryptocurrencies are all off limits in his world of investing.
“I didn’t really touch oil. That just seemed like the Wild West to me and I didn’t understand it at all.”
Some traders capitalised on oil’s historic sell-off. For example, BB-energy bought 250,000 barrels of oil during the historic plunge below $US0 and likely made a fortune.
But Portnoy said: “I paid, I have a couple of my watch list, like an OAS [Oasis Petroleum, a Texas-based fracking firm] stock, which can be up 30 per cent one day, down 30 per cent the next. I invested very little in it.”
Portnoy also said he is also reluctant to invest in movie theatres.
“Movies centres are one that I’m a little bit [wary of] because obviously that’s severely hit by a COVID and that’s something that I think people can access without going to a movie theatre.”
“That is one very depressed industry that I’m reluctant to buy,” he added.
Portnoy identified cryptocurrencies as another area which he just wouldn’t simply touch. “People are begging me to get into crypto, but I don’t understand it.”
Asked in the conversation what he would have done differently in his day-trading journey, Portnoy said he regrets shorting stocks.
“I am done shorting, I got murdered every single time I did it, so I gave up on that,” he said.
Portnoy’s experiment with shorting stocks turned sour when he tried to short Boeing’s stock in March, betting on the company’s stock falling as the pandemic stopped air travel.
He also said he has stopped investing in companies solely based on earnings.
“Like I went through a phase where I kept in investing companies [based on just earnings] and that really didn’t pan out. So those are two things that I no longer really do,” he said.
Portnoy said he expects the big four US airlines to post lower earnings, but still plans to hold airline stocks for the long-term.
“Like I’m not day trading, really the airlines, I bought them. I’m holding them eventually, they’re going to have earnings. I know that’s coming, but I’ll just hold them right through. And I don’t expect them to have good earnings. I mean, how could they, but I don’t think that matters,” he said.
Billionaire Leon Cooperman recently warned that the rise in Robinhood trading will “end in tears” as according to him many of these day-traders are unaware of the risks.
But Portnoy dismissed those comments.
“I don’t think it is going to end in tears unless, you know, you’re leaving all your chips on the table and just waiting for a crash. I don’t think we’re going to test the lows again. So again that just sounds like a old school investor who doesn’t like the new game right now,” he said.
“I haven’t heard anybody ask me: ‘Are you proud of how much money people have made over the past four months?’”
“It would have to take us to retest the lows for people to lose money based on the advice they have been following from me,” he said.
So while Portnoy has taken his fair share of risks and is often touted as spontaneous in his investment style, he claims to have learnt from some of his mistakes and steer away from asset classes beyond the scope of his understanding.
“Just like with gambling, you have to always bet within your means. You know, at no point was I exposed with money that I couldn’t be afraid to lose,” he concluded.