Dave Portnoy is the founder of Barstool Sports. Barstool Sports has endured (perhaps enjoyed?) its share of controversy over the years, but that’s not why people in the financial services industry don’t like to talk about him. People don’t like to talk about Dave Portnoy because he has been killing it.
He had only bought one stock in his life before the quarantine, but when the country shut down in March, canceling sports and sports betting, the 43 year old Portnoy, a.ka. Davey Day Trader Global, started day trading. And live streaming it. To 1.5 million Twitter followers.
Thank goodness for his disclaimer, “I’m not a financial advisor. Don’t trust anything I say about stocks.”
Stuck at home with plenty of free time, government stimulus checks, no sports to bet on and a guy like Portnoy turning investing into entertainment, more and more young people are logging on and trading along with Davey Day Trader. “With the volatility, it is kind of like watching a sports game,” said Portnoy.
It might seem a little scary that his plugs appear to actually have some effect. Last Wednesday, Portnoy mentioned penny-stock InspireMD (NSPR), and its volume surged to an all-time high of 52 million shares. Unfortunately, anybody who bought it that day has gotten crushed, which is why his online slogan that “stocks only go up” continues to make me cringe. Nevertheless, he’s had some trades, like the airlines, that have worked.
Over the last month, we have seen other eye-popping moves in individual stocks, and several of them were also apparently driven by retail investors and lacked easy explanations beyond Portnoy’s Twitter feed. The rotation into speculative names is clear from Robinhood’s open source data, and that data along with Portnoy's actions point to a severe dislocation between stock prices and economic reality that risks a return to bearish territory, according to Peter Cecchini, the former global chief market strategist at Cantor Fitzgerald. Cecchini, in a post on LinkedIn on Friday, wrote that government stimulus checks accelerated the growth of casual retail investing with discount brokerages like Robinhood, and the combination of that influx of "found money" with relief from the Federal Reserve and Congress has created "an unholy speculative mix.”
About Portnoy, Cecchini wrote, "His attention-getting, wild style is emblematic of just how emotional and extreme equity markets are now. It's both impulsive and compulsive. His behavior really just explains everything."
Robinhood added more than three million funded accounts in the first four months of 2020, and half of customers who opened accounts this year said they were first-time investors, according to spokeswoman Nora Chan. E*Trade Financial Corp. had 329,000 net new accounts in the first three months of the year, with 260,000 added in March alone, the firm said in its first-quarter earnings statement. That was more than the company’s previous best annual net record.
What’s Portnoy have to say about that? “The smart money is the Robinhood accounts and dumb money are billionaire hedge funds.”
The bottom line is that I wouldn’t ever invest in anything that I heard about from Dave Portnoy, but I don’t think crazy statements like these are terribly hurtful anymore, either-- at this point, we all know it’s simply all about the clicks, right?
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