The catalyst for Dave Portnoy’s foray into the high-risk world of day-trading was the timeout that the COVID-19 pandemic imposed on professional sports.
Without football, basketball, soccer or hockey — the mainstays of the Barstool Sports blog he founded, Portnoy was at a loss. The stock market, volatile but still operating at full throttle, offered him a new challenge.
“I’m trading my own money and lots of it,” Portnoy told FOX Business. “I’m having fun. As long as we’re still kind of with nothing else to do, I’ll keep day trading.”
Portnoy has become the poster child of the day-trading craze, livestreaming his daily trading sessions on Twitter, giving followers a glimpse into both his successes and failures as he slings positions worth hundreds of thousands of dollars.
Portnoy isn’t alone in diving headlong into the stock market to help fill his sports gambling void. The sports-betting industry was a $150 billion business in 2019 and gamblers have since March been limited to wagering on South Korean baseball and other obscure sports, causing many of them to turn their focus to the financial markets.
“Sports gambling is a huge business in this country and a lot of sports gamblers and a lot of these millennial gamers are now playing the stock market, day trading,” Jim Bianco, president and macro strategist at Bianco Research, told FOX Business. The shift is evidenced in enrollment at Robinhood and other web-based trading platforms.
“The Robinhood numbers are just showing you parabolic increases in the amount of accounts opened, positions added and every other broker is telling us the same thing,” he said.
Nearly 800,000 people opened new accounts at the three biggest online brokers in March and April amid the heart of the COVID-19 lockdowns, according to the Financial Times. That wave of new accounts has infused life into an industry that had been left for dead.
Two years ago, everyone was throwing their hands up saying, “How do we get retail investors interested in the market again?” J.J. Kinahan, chief strategist at TD Ameritrade, told FOX Business. “Well, you know, all of a sudden, retail investors are interested in the market again.”
The industry’s rebirth has been fueled not only by brokers’ decisions last fall to slash commissions to zero, but also a news cycle that has pumped up market volatility. Investors aren’t just blindly diving into the market either, according to Kinahan. He said that TD Ameritrade has seen a “3x lift” in the number of customers taking advantage of educational tools.
That and the fact that Ameritrade’s Investor Movement Index showed clients last month increased their market exposure for the first time since January suggest they may not have been buying stocks hand over fist during a 36 percent surge off the March 23 bottom.
New customers, who are skewing younger, are seeing opportunities that “a lot of professional traders miss,” Kinahan said. He pointed to TD Ameritrade’s data, which shows clients were buying the heavily beaten-down airlines and cruise operators beginning in March. American Airlines is up 85 percent since bottoming in May and Norwegian Cruise Line Holdings has surged 125 percent since March 18.
Portnoy, who can rattle off pretty much every trade he has made and the levels where he bought and sold, was among those who scooped up cruise operators and airlines on the cheap.
Some of his best trades have been buy-and-holds in Spirit Airlines and Boeing, which have gains of 169 percent and 58 percent, respectively. He also made 130 percent on a day trade in the recently-bankrupt rental car company Hertz.
“The smart money is the Robinhood accounts, and dumb money are billionaire hedge funds,” Bianco said with a hint of sarcasm. He alluded to legendary investor Stanley Druckenmiller, who on Monday told CNBC’s “Squawk Box” that he had returned just 3 percent since the stock market bottomed on March 23 while the benchmark S&P 500 was up 43 percent.
Druckenmiller said he has “been humbled many times” during his career, which has spanned more than four decades, and that the last few weeks “certainly fits that category.”
Portnoy, who is worth about $100 million after selling a 36 percent stake in his company to casino operator Penn National in January, told FOX Business he is up $250,000 after gaining that much on Friday.
Portnoy has had some bad trades too. He took a big hit going “all-in” on Lululemon ahead of the company’s fourth-quarter earnings report on March 26. While Portnoy was correct in being bullish — the stock has soared 53 percent since the report — he got shaken out as shares fell by as much as 9.7 percent over the following five trading days.
Portnoy said he got “murdered” when he tried to short Boeing back in March — basically, making a bet that the planemaker’s stock would fall — and doesn’t think he will be shorting stocks again “anytime soon.”
His trading decisions and commentary have made him a target of the so-called Fin-Twit community, comprised mostly of financial pros and journalists who say he doesn’t know what he is doing and his bank account will eventually pay the price.
“If these people were so smart and as good as they say, they wouldn’t be spending all day tweeting at me,” Portnoy said. “They’d be on a yacht somewhere.”
