(Bloomberg) -- There weren’t many trades that hit in a bruising year on Wall Street. Charles Lemonides nailed one of them.

While every other S&P 500 sector fell, the chief investment officer of New York-based ValueWorks rode a surge in the energy sector to a gain of roughly 40% through November in his flagship fund — helped by a handful of short bets on erstwhile high-flying tech names.

Lemonides’s $164 million ValueWorks Limited Partners Fund counts Chord Energy Corp. and Valaris Ltd. among its top holdings — companies that gained this year as the economy recovered from the pandemic and oil prices rallied in the wake of Russia’s invasion of Ukraine. And earlier this year, his firm bet against previously high-flying tech firms like Peloton Interactive Inc., which is down 74% for 2022, as well as Beyond Meat Inc., which has shed 80% of its value. He has closed those shorts out.  

“You have to be really careful about buying stocks, you have to be very balanced in your portfolio, and I think it’s a good time to be finding places to short individual stocks,” he said in an interview at Bloomberg’s New York headquarters this week. “We’re more short now than we’ve ever been,” he said, adding that he has more individual short names and a larger short percentage than at any time prior during his three-decade career. 

Stocks and bonds have both suffered in 2022 as the Federal Reserve raised interest rates to fight inflation that turned out stickier than officials had previously thought. A 60/40 portfolio of bonds and equities has lost roughly 16%. The S&P 500 fell 1.5% Thursday in New York, extending its annual plunge to 20%.

Though Lemonides has favored certain energy names since early 2020, he is short some companies within the sector, including Texas Pacific Land Corp. — which he says is “off-the-charts expensive” — as well as Occidental Petroleum Corp. and Hess Corp. Meanwhile, he’s betting against firms like Broadcom Inc. and TransDigm Group Inc., which he says are highly levered. 

The CIO says he’s been building his shorts over time and consistently because this cycle is playing out in a textbook manner. With each passing money, financial conditions have gotten tighter even as the economy has continued to expand, meaning that the Fed’s job isn’t yet done — the central bank will need to cool the economy further. 

“I don’t think it gets easier anytime soon,” he said. “The Fed is going to drain liquidity until it has an impact — and it hasn’t had an impact on the real economy yet. And so I think that’s going to be a tough window for investors.”

(Updates trading)

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