Acadian Asset Management’s Zhe Chen reaped significant gains when Guzman y Gomez’s (GYG) share price plummeted nearly 20 per cent following its recent earnings announcement. Chen’s Australian Equity Long Short fund, which employs artificial intelligence to analyse roughly 1000 stocks daily, established a short position in the Mexican fast-food chain just before the August 22 earnings call. Guzman y Gomez is a Mexican fast-food chain that debuted on the ASX in 2024. Acadian Asset Management’s Australian Equity Long Short fund uses artificial intelligence to process market data and identify investment opportunities.
The AI model, scrutinising analyst notes, earnings calls, press clippings, and market data, detected concerns about GYG’s cash flows relative to its operational and reinvestment requirements. This suggested a potential need for external financing. Chen noted that short sellers were also increasing their positions, signaling further caution. Despite not knowing the exact earnings outcome, the confluence of these signals pointed towards a likely disappointment, forming the basis for the profitable short position.
Chen highlighted that the fund’s returns are disproportionately driven by its short positions, comprising approximately one-third of overall returns. He argues that shorting, like investing in small-cap stocks, is less efficiently covered by analysts, increasing the likelihood of identifying overvalued stocks. Acadian protects against the inherent risks of shorting by immediately covering losses when a stock moves unfavourably.
Beyond Guzman y Gomez, Acadian has also shorted companies like IDP Education and NextDC. Conversely, the fund has benefited from long positions in companies such as Pro Medicus and Qantas. Chen emphasises that AI’s unbiased analysis allows for opportunities, such as Qantas, that might be missed by human intuition, illustrating the fund’s data-driven approach to investment decisions.
