Hedge funds

Eric Sprott and Tom Stanley lost big yesterday

OPM 2 min read

Eleanor Roosevelt said great minds discuss ideas; average minds discuss events; small minds discuss people. But why would you listen to an antisemite who married her fifth cousin?

So forget her, we are going to discuss events and people. Specifically, Tom Stanley (aka Tom Lazarus Stanley), Eric Sprott and how between them, they might have lost $250 million on a gold stock yesterday. A few days ago, I solved the mystery of how the Resolute Performance Fund was able to rise from the dead and go up 8x since 2016. The answer is Kirkland Lake Gold - a stock that went from $3 in 2016 to $67 at its recent peak. Resolute owned anywhere from 10 million to 16 million shares over the years. My guesstimate is that Resolute is (or was) sitting on gains on Kirkland of at least $200 million, perhaps as high as $500 million. It’s a big position for what is likely a sub-billion fund.

See the correlation between Kirkland and Resolute for yourself:

Yesterday, Kirkland fell 17% when it announced a bid for Detour Lake Gold. The last regulatory filings indicate that Eric Sprott owned 14+ million shares, while the Resolute fund owned 10+ million shares. The stock dropped $10+ yesterday. Assuming that the holdings are unchanged, that’s a combined paper loss of ~$250 million. The Resolute fund lost 8.71% yesterday (or since last NAV print). Anyways, this would be nothing new for Resolute - Tom says right on his homepage, “this fund is not for the faint of heart”. To be clear, the stock is still up materially year-to-date, this is just a blip.

Separately, I was able to find the exact wording of an ad Tom Stanley placed about two years ago essentially looking for a successor:

This is an ideal position for a great stock picker who ultimately wants his/her own investment management firm. Our President/Portfolio Manager is 62 years old and we are initiating a succession planning process.

The firm’s AUM has grown dramatically since 2016, crossing the $500m mark not long ago. I don’t know what the status of this succession plan is. And I don’t know to what extent Kirkland’s more recent setback highlights how everything in life is ephemeral. Robert Frost said: Take care to sell your horse before he dies, the art of life is passing losses on. Even Lazarus, though he was brought back to life, eventually died a second more permanent death, otherwise, Oprah would have interviewed him by now.

I think of OPM Wire as less of a free newsletter and more of a no-fee investment bank. Many boutique-y money managers vitally dependent on the services of a one-of-a-kind investor face transition issues. Sometimes this investor is iconoclastic, sometimes idiosyncratic and sometimes just plain idiotic. Forget Onex, OPM Wire stands ready, willing and able to help ensure smooth transitions with creative structures that lean heavily towards earnouts. We can pay in gold or uranium if that’s your preference.

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