Last Updated on April 24, 2022 by Oddmund Groette
Dana Galante is an American investor and stock trader. She is the managing director of Miramar Asset Management, where she helps her investors to balance their long stock investments. Dana was a short seller; she profited when stocks in her portfolio declined and lost when the price rose. She had an average 15% per annum compounded return from 1994 to 1999.
Dana Galante and Miramar Asset Management:
Dana Galante managed capital via her own management company called Miramar Asset Management. This company is no longer active.
What was so special with Galante’s fund is that she was only employing short selling strategies. Yes, you heard that right. Short-selling is difficult, very difficult, and that makes her track record even more astounding:
She achieved this 15% return even when the Nasdaq (which accounted for about 80% of her trades) rose by 32 percent for the year — indicating her mastery of short selling. Her performance could be compared with that of mutual funds, which averaged around 15% pa return during a period when the stock market dipped by an average of 32 percent.
She worked from San Francisco because the time zones between New York and Chicago allowed for a smooth work-life balance. Her father was a market maker in the over-the-counter market, and Dana assisted him during the school holidays.
Dana’s career typically began in the back office of Kingston Capital, an institutional money management firm, before she was promoted to a trading (order entry) clerk position. Then, she became a fund manager with no prior experience in stocks selection — initially as a co-manager with another inexperienced person.
She worked for several firms. In one of those firms, she worked closely with an eccentric hedge fund manager — this is how she got her passion for shorting, which she felt was more challenging than going long. After some time, the hedge fund manager resigned, and she took over.
In 1997, Galante founded her own fund (seven years later). She looked for companies whose value she thought will decrease in the future as an alternative to shorting stocks that had already experienced a decrease in earnings.
“I look for stocks that are high relative to their value,” she said.
She traded using a top-down approach. One example was when she headed the hedge fund; the gulf war was an indicator that oil prices would rise. And this would hurt the US economy. Therefore she would short cyclical stocks. She used charts for what she referred to as “market timing,” but it sounded like taking profits.
She usually exited her short positions if the stock price dipped to a support level— she described it as a region in the past where there were many buying activities, and the price ranged for a while before rising. Additionally, she got out of stocks that are making new all-time highs.
We don’t know why Miramar Asset Management has closed down, but short selling is extremely difficult because you are fighting the overall upward bias in stocks.
Why invest in short-only fund?
The reason is obvious: because of uncorrelated returns if you have such a fund in your portfolio. We have written numerical articles about this. Here are two:
Dana Galante quotes:
Most people are afraid to go short because they think the risk is unlimited. That never bothered me. I consider myself pretty disciplined. I always thought that I had a good handle on the risk and that I could get out of any short before it caused too much damage.
One thing I look for is companies with slowing revenue growth who have kept their earnings looking good by cutting expenses. Usually, it’s only a matter of time before their earnings growth slows as well. Another thing I look for is a company that is doing great but has a competitor creeping up that no one is paying attention to.
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