#thalers

Sol de Janiero Minis

By Svea Herbst-Bayliss and Katya WachtelNEW YORK, Oct 18 (Reuters) - For months John Thaler's strong and steady returns have defied gravity, but now the hedge fund standout's performance is coming down to earth.Thaler's JAT Capital, which more than doubled assets to roughly $2 billion this year thanks to impressive returns and fresh investor demand, fell 5.3 percent in the first two weeks of October, two investors said.That loss comes on top of declines in September, when the fund dropped 3.2 percent during a brutal period for markets.The sudden reversal of fortune at JAT, a four-year-old fund spun out of Chris Shumway's more famous portfolio, is noticeable because the fund has delivered nothing but positive numbers this year even as other managers dipped into the red. In early September, JAT's returns peaked for the year at a dazzling 38 percent, investors said.To be sure, Thaler still presides over one of the industry's very best records this year -- he is up 24 percent through mid-October -- but the recent drop illustrates just how tough it is even for stars to stay on top.FEW STOCKS HIT HARDPeople familiar with Thaler's portfolio blame the drop on a few stocks that Thaler, whose roots are in technology, media and telecom investing, has long liked. And the selling likely continued early this week when Green Mountain Coffee Roasters , once the fund's largest holding, tumbled.A spokeswoman for Thaler declined to comment.Netflix , the company that delivers movies to people's homes, was among Thaler's top 20 picks for months. But in September the stock plunged 51 percent as investors made clear their displeasure with the company's plans to separate its DVD-by-mail and on-line video streaming services and raise prices.Although Thaler had been trimming back on Netflix all year, he loaded up again at the end of September and now owns more than 4 million shares, or 7.6 percent of the company.He made the move only days before Netflix reversed itself on the breakup plan. Still, the stock price has not recovered and is down 60 percent over the last three months.Thaler's bet on America's lone rare earth oxide producer, Molycorp , also encountered trouble last month when the stock plunged 40 percent. Analysts said worries that China controls most of the supplies of rare earths have forced manufacturers to cut back on using them and hurt Molycorp.So far in October, though, Molycorp has climbed 13 percent.The JAT portfolio also suffered declines in Chinese Internet television company Youku.com , whose stock has tumbled 66 percent in the last six months even though it has recovered a bit in October.COFFEE ROASTER LOSES SOME BUZZThaler's troubles were likely compounded this week when another hedge fund star, David Einhorn, laid out a negative case for Green Mountain, long one of Thaler's most profitable holdings.In the first quarter, Green Mountain was Thaler's biggest single bet. And when the stock price nearly doubled, it helped push the fund manager into the industry's top rankings. But Einhorn's concerns about the roaster's accounting practices and upcoming patent issues kicked the stock price down 10 percent on Monday.If Thaler still owned the amount of Green Mountain he owned at the end of the second quarter, he lost $9 million as his holdings, valued at $80.4 million at the end of September, shrank to $71.4 million at Monday's close.After riding high for so long, Thaler suddenly got shy about showing outsiders how he was doing. Last week he stopped reporting returns to the HSBC Private Bank, which tracks hundreds of fund managers.While some investors said he might have stopped reporting because he has temporarily closed his fund to new investments, others quietly said performance was the real reason.