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OPTO Sessions Edwin Dorsey reveals secrets to The Bear Cave success

Like many American children, Edwin Dorsey used to be fascinated by baseball and basketball cards. Somewhat less usually, it wasn’t the love of sports that drove his fascination – it was the players’ performance statistics.

“I was in third grade and really liked math and playing around with numbers,” he tells Opto Sessions. “I also liked learning, and soon the stock market became the place to explore those curiosities.”

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Dorsey, the still youthful 23-year-old founder of the influential short-selling newsletter The Bear Cave, said his fascination in the markets grew as he listened to talks from the likes of Warren Buffett on YouTube.

“But what really took it to the next level was my grandmother, who put about $2000 in an E*TRADE account and gave me a username and password,” he explains. “The first three stocks I bought were McDonald’s [MCD], Apple [AAPL] and a healthcare company called Cepheid, which got bought by Danaher [DHR].”

Dorsey’s investment career saw him take a stint writing for Seeking Alpha. He was still a teenager in his senior year of college at Stanford when he set up The Bear Cave – just a month before the coronavirus pandemic hit – in February 2020.

“I talk about stuff going on in the short world. I recap new activists’ shorts and sometimes do my own little investigation”

 

“I talk about stuff going on in the short world. I recap new activists’ shorts and sometimes do my own little investigation,” he states. “The Bear Cave is focused on exposing bad companies. It’s corporate misconduct and customer relationships.”

Indeed, Dorsey says there is one easy way to tell if a business is bad – they don’t have happy customers. “They have either a dissatisfied customer base or a neutral one. So, customers who have to use them but don’t want to,” he explains.

When researching such companies, Dorsey says he will file a Freedom of Information Act request with the regulator or multiple regulators for any consumer complaints. Other tricks of the trade include looking for any executive or board resignations and lawsuits on the PACER website.

Dorsey exposed one bad company – Care.com – whilst still a freshman. “It was the largest babysitting platform in the US at the time. A friend of mine who was using it to find nanny jobs thought it was kind of shady,” he says. “I pulled up PACER, and it had a lot of lawsuits against it for safety issues. There were also reports of babysitters hurting kids. So, I signed up as Harvey Weinstein with a fake email address, and they approved me.”

“I pulled up PACER, and it had a lot of lawsuits against it for safety issues. There were also reports of babysitters hurting kids. So, I signed up as Harvey Weinstein with a fake email address, and they approved me”

 

Dorsey wrote up the story and shared it on Twitter, where it went semi-viral. Care.com’s share price fell, leading to Dorsey receiving a legal letter from the company.

Undeterred, Dorsey wrote a second article detailing more consumer complaints, which eventually led to a front-page story in the Wall Street Journal, exposing a link between Care.com and eight deaths caused by babysitters with prior criminal histories. The CEO of Care.com eventually resigned, and the firm was sold.

On the other side of the spectrum sit Twitter and bitcoin – the only two market assets that Dorsey owns. Twitter is his favourite.

“Twitter has announced a lot of new initiatives around monetisation and engagement that I think are going to turbocharge the platform,” he explains. “I built my business on the back of Twitter. It’s essential for online content creators, and there is going to be a shift as they monetise through Twitter.”

Even the recent departure of CEO Jack Dorsey hasn’t changed his view. “This is an unpopular opinion, but I love Jack Dorsey as a CEO. When he took over as CEO, Twitter was a mess. Now, user growth is like 20% year-over-year. He is hyper-focused on customer experience and on doing the right thing,” he says.

“This is an unpopular opinion, but I love Jack Dorsey as a CEO. When he took over as CEO, Twitter was a mess. Now, user growth is like 20% year-over-year. He is hyper-focused on customer experience and on doing the right thing”

 

“He’s very much the anti-Zuckerberg. Twitter invested a tonne in content moderation and creating a healthy platform. It banned political ad spending way before Facebook was even thinking about it. It’s just kind of night and day. I think the new Twitter CEO [Parag Agrawal] is close with Dorsey and is going to keep that culture in line.”

 

To hear more insights from Dorsey, listen to the full episode on Opto Sessions.

 

And for more ways to listen:

 

Listen to the full interview and explore our past episodes on Opto Sessions. You can also check out all our episodes via our YouTube Channel.

Disclaimer Past performance is not a reliable indicator of future results.

CMC Markets is an execution-only service provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.

The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although we are not specifically prevented from dealing before providing this material, we do not seek to take advantage of the material prior to its dissemination.

CMC Markets does not endorse or offer opinion on the trading strategies used by the author. Their trading strategies do not guarantee any return and CMC Markets shall not be held responsible for any loss that you may incur, either directly or indirectly, arising from any investment based on any information contained herein.

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