Mat Klody presents “The Art of Short Selling"

Author: Darcy Dehais

On Oct. 3, the Notre Dame Institute for Global Investing hosted Mat Klody, the founder and current portfolio manager of MCN Capital Management, a fundamental value-focused investment partnership out of Oak Brook, Ill. Klody shared “The Art of Short Selling.”

Before founding MCN, Klody served as Senior Vice President and Senior Analyst at Sheffield Asset Management, a long/short equity hedge fund out of Chicago with over $400MM in AUM. Prior to that, he was one of two analysts at Alleghany Corporation covering a long equity portfolio.

Klody graduated summa cum laude from the University of Notre Dame with a degree in finance and business economics. While at Notre Dame, he was an assistant PM for the Investment Club and a member of the AIM V class.

Klody highlighted differences in the markets from the time when he was an undergraduate to now, emphasizing the series of bubbles, crashes and dramatic price fluctuations during that time. Moreover, Klody described the current trend toward passive investment management.  When discussing inefficient markets, he explained that they create an opportunity for intrinsic value investors but noted that investors must be disciplined and patient in order to generate superior risk-adjusted returns over time.

He also discussed an effective strategy to take advantage of inefficient markets: short selling. Short selling is the practice of selling securities not currently owned, with the hope of repurchasing those securities at a discounted price. While short selling can produce quality returns, Klody warned that there are risks to short selling including unlimited potential loss, inflation, the short squeeze phenomenon, and the fact that markets generally increase.

Using data from real-world companies, Klody presented case studies of short selling in today’s markets. He closed the evening by sharing the names of some of his favorite books and websites that have helped him throughout his investing career.