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Note: Salem Abraham's once high-flying fund has faced a tough year.
By Irwin Speizer
Photographs by Brent Humphreys
This is a tale of Texas the Panhandle of Texas, to be exactand a little oasis of a town along the Canadian River perched on the edge of the often-parched Great Plains that would feel at home in a Larry McMurtry novel, with its single-screen movie theater and the only two stoplights for 45 miles. It is a saga of the railroad, ruined ranchers, buried natural riches, and a family dynasty that traces its legacy from Lebanese immigrant peddlers to a systematic futures trader who now manages nearly a half billion dollars from an office above the town's steak house. If McMurtry were writing this story, he might call it "The Best Little Hedge Fund in Texas."
Barron's named that trader's fund, Abraham Trading, one of the top 100 hedge funds in the world in both 2009 and 2010, based on a review of the previous three years of returns. Those returns were generated in the tiny town of Canadian, Tex. (population 2,281), a sleepy location about as distant in time and temperament from places like New York and Chicago as one could imagine.
But this year at Abraham Trading has been a challenge, less like a pleasant hayride than a prolonged period in the saddle of a bucking bronco. Salem Abraham, the 44-year-old president and owner of Abraham Trading, who comes to work in jeans and work boots in an office adorned with giant paintings of rodeo cowboys in chaps, has been struggling with ornery commodity trends that he has been unable to harness with his computer models. This led to a losing streak that lasted for more than a year until he finally scored a strong positive month in August.
Abraham trades 59 futures markets, but 56% of his focus is on commodities, where bumpy price movements without clear directions have been particularly troublesome to his systems, resulting in regular losses. Of his 15 worst-performing investments in 2010 through July 26, all but two were commodities. Only one commodity, platinum, made it into his top 15 best performers.
His biggest money losers for the period were cotton (down 1.599%), crude (-0.886%), heating oil (-0.879%)...