An American Hedge Fund
In short from the back cover of the book:
“Timothy Sykes turned $12,415 of Bar Mitzvah gift money into $1.65 million trading thousands of stocks from 1999-2002, managed the #1 Short Bias Hedge Fund from 2003-2006, and starred in the TV documentary Wall Street Warriors all before the age of 26.”
He is just a normal guy with an affinity to money in young ages like so many of us. Tim gathered experiences in selling used tennis balls when he was a kid and read finance books from the library of his father. From watching CNBC in the evening he got the information about the companies he was interested in. So far so good, but it was only a matter of time that he quickly lost himself in the digital world. The information overload is too much these days if one is not focused.
Staying focused is the key factor if you don’t want to waste great amounts of your time. It’s so seductive to just click through all the interesting links in the web but it get’s you nowhere. In the end you have seen a lot but you didn’t actually read anything.
In the beginning Tim’s main interest was in penny stocks or stocks with prices below $5.He used his Bar Mitzvah gift as gambling money and started investing in 1999 which was quite perfect and bullish as you know.
His strategy was to concentrate on company news which he thought were the main factor behind stock prices. He used message boards and press releases (ticker spam) to get the information. He didn’t hold the stocks for long, just hours or days and that was his advantage in the fast paced market.
I would say it is not the news which move stock prices but rather the way how people react to these news. One can’t say that positive news move prices higher in these days. Sometimes people just ignore it and sell anyway. So I think it is better to concentrate on how people will react to the news to predict future price moves than just on the news itself.
In average he sold at a profit of about 20%. “His impatience taught him to take large positions and aim for small price moves rather than to take small positions to wait for large price moves. In the first months in 1999 he traded internet stocks (what else in 1999 
) like NTXY, SLEU or WKWG for good profits.
Betting on IPO’s were another way he made gains in the following months. He closed the year with a gain of nearly $107’000.
Making this much money made him popular not only in message boards. Friends and people wanted to know how he was doing this.
Early 2000 he traded ISCO (now ISO). A perfect timing and and some unintended delays of the order made him a gain of $123’000 possible. By the end of march his winning pattern – buying before the market close and selling quickly at the market open – was used by so many people that it was now an unprofitable strategy. The more people know about your strategy the more ineffective it will get.
Until then he traded solely the OTCBB. By mid April 2000 he started trading the most popular technology related stocks and began losing money. He traded shares of SUN, CISCO, YAHOO, INTEL, …
Finally he decided to take some time off. Mid April he moved New Orleans. In the Summer 2000 Tim discovered short selling. His first strategy was “Simply looking for stocks that fell the hardest, bounced the quickest and now appeared ready to reserve lower again.” He aimed to make 5 to 10% on each trade but unusually ended up taking profits after only 2 – 3 %.
He continued short selling throughout the summer 2001. After 9/11 Tim saw several trading opportunities in security companies but finally he decided to play it safe by watching the action from the sideline.
Early 2002 he started the “Timothy Sykes Day Trading Award for the Talented” scholarship at Tulane. He went on a study abroad program on a cruise ship and after that he moved to New York, the center of capitalism itself. He thought he has to live where the big money is.
In 2003 he started his hedge fund and his main interested was how to raise money which he could invest. The hard thing was to persuade investors to give you money although you’re not willing to disclose the process by which you intend to make them more money. In August 2003 his fund broke the million-dollar asset mark.
In 2004 he moved back to Orlando to make a fresh start. He started investing in Cygnus Entertainment which he thought will be the next Ticketmaster. The CFO was also the father of a close friend of Tim so he thought this would be a safe play.
In April 2004 his fund had a monthly return of about 13% which made him the industries top performer. In August 2004 he invested again heavily in CYGT. In summer 2005 he got his first FoF investor and by end of June he had over $2.2 million in assets.
In December 2005 the problems began when Cygnus’s stock price declined to the $1 range. This move alone was responsible for a 6% loss of the fund in December.
In 2006 the problems with Cygnus were even worse. The stock traded now at 75 cents and the company needed money. I don’t know why but Tim invested another $75’000 . In late march Cygnus’s CEO called to say the company needed one more $100’000 investment to make it to the summer. And again – I can’t understand why – he invested additional $100’000 ! Now the CYGT position was one third of the fund!
By June the stock price of CYGT was 30 cents and his fund was 9% down on the year. This scared away many investors and all of the FoF’s. The future didn’t look very bright.
In the end of 2006 and beginning of 2007 Tim was also part of the reality show “Wall Street Warriors” on the tv channel MOJO, was on CNBC, started his book and his website www.timothysykes.com.
In the end the fund was closed. Many critics said that he was lucky making this much money or that is wasn’t difficult in 1999 because everything was in an uptrend. For these people he announced on his website that he will do it again. He starts again with his $12’415 and writes about every trade he makes on his blog. He stated that it will take him longer but he will reach his goal. Good luck!
This is the first part of several entries I would like to make about the book “The Art of Happiness”. I will try to summarize the main ideas of the discussions between the Dalai Lama and Howard C. Cutler and I will also try to add my own thoughts about certain topics.
