Short selling is as old as the business of securities trading. As early as the 17th century the Dutch had made short selling illegal. In subsequent years, shorting was made a crime by various monarchs, governments and eventually exchanges. Even New York State legislated against shorting in the early 1800's, only to retract the law forty years later.
Short selling is largely ignored by the 70 million or so investors reported to be directly involved in U.S. stock markets. Those who do understand frequently criticize shorting as overly speculative or pessimistic. What the critics fail to understand is how important a role shorting plays by providing liquidity and giving the investor greater flexibility in managing their portfolio.
The Motley Fool gives a great introduction to short selling. Check back with me - I'll post more info on the basics of short selling in the next few weeks.
Walgreen - WAG - Solid company, but the price being paid for this non-techie is dumbfounding. Also, the competition from CVS and others will eventually eat into profits. And that was all before the recent explosion of online drug retailers.
Starbucks - SBUX - A good example of a company using expansion as its means of keeping profits moving. Same store sales increases don't justify the price for this one. Looks similar to Nike?
Just for Feet - FEET - Tough market to begin with combined with the NBA strike and so-so management made this a successful short. Just hit the new low I was looking for.
Data Tran Network - DTLN - One of the few high-techs you are likely to see here, Data Trans is in a dead-end market providing data to agricultural traders. Unless they can be bought out, their situation is not likely to improve in the near future. And this one too is on the verge of making a new low.
Caterpillar - CAT - Nothing horribly wrong with CAT, except that it's very cyclical coming towards the end of the wave. I would be careful of one last run-up in the cyclicals, but probably safe to scale into?
Coin Mach Laundry - WDRY - Here's a chain of laundromats that I can't say enough negative things about. The only thing keeping it afloat are the people listening to recommendations from Bankers Trust - the underwriter.
Pacific Sun - PSUN - Pacific Sun is dealing in a tough retail market with a fickle clientele. This isn't a definite short, but the makings of one are there.
Kellog's - K - Commodity prices are at a 12 year low and they still can't get their act together. Breakfast cereal is on the outs with more health conscious parents and when corn and wheat prices eventually spike up...
Avant! - AVNT - This company seems to keep rolling along on nothing but fumes. Not much in the way of a product - just more promises and research.
99 Cent Stores - NDN - This is one that needs more research. One family running an enterprise that has had only one big name -- Woolworth's. They're expanding and margins are supposedly good for this type of store, but my feeling is that the odds are against them in the long term.
Cyclical- Trading cyclical downturns takes a good deal of macro level smarts, but doing some solid research inspires more confidence than a purely technical play. Recent woes in the steel and oil industries are good examples of cyclical industries that have hit hard times.
Fad- Ever walk past an "American Backrub" store? Companies with nice statements held together with one hot product are in trouble unless they can put together a string of successes. It's important to note, however, that one fad gone flop might not phase otherwise good company.
Fraud- This can include everything from falsified earnings reports to bogus claims of a new wonder-drug. Finding evidence of fraud is difficult, but can yield a mother-lode for the short seller that finds it. Recent examples include Cendant (only great analyst out of thirty was unbiased enough to see that one coming), Oxford Health and Bre-X Mining.
Prudent Bear Fund
Fiends Superbear Page
-The grizzly of bear investor pages. Lots of news and links to balance your view of the market.
Bear Market Central
-Very good for learning the basics of short selling. Lots of links and some shorting ideas.
-Well polished site good general bearish page. Includes some links and some shorting ideas.
Bob's Bombshelter Bear Page
-Listing of various historic papers and current examples of what happens in a speculative bubble.
Your comments and suggestions are always welcome
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