Tag Archives: seeking alpha

Shorting Stocks Will Outperform The Market

On December 1st, with a short-sell report I wrote on L Brands (LB) and published by Seeking Alpha (note:  that was the last article I submitted to Seeking Alpha – you can now find my work on Simply Wall St.)that I used to launch the Short Seller’s Journal, I explained why L Brands was a great short idea at $96.  Here was my rationale:

L Brands (NYSE:LB) is a specialty retailer that operates the Victoria Secret and Bath & Body Works chains. It also operates La Senza, a Canada-­based intimate apparel retail concept, and Henri Bendel, a high­end accessory products brand. The stock has run from under $7 in March 2009 to its current (November 27) price of $96.68. In that time period, it has outperformed the S&P 500 by over 350%. But, in the context of rapidly slowing revenue growth, declining operating margins, increasing financial leverage and a likely pullback in consumer spending, LB’s stock is extremely overvalued relative to its underlying fundamentals and relative to its peers. In my view, LB represents a compelling opportunity to short the highly overvalued stock of a company operating in a business sector facing significant economic headwinds.

Here’s how the LB short performed from 12/1/15 to present, after reporting an pre-arranged “beat” of Wall St’s earnings estimates (the big game that has developed over the years is for management to “wink wink” walk Wall Street’s robotic analysts’ quarterly estimates down to a level below the actual numbers the company plans to report) but was forced to warn about the rest of the year:

As you can see, shorting LB on December 1, 2015 has significantly outperformed the XRT retailer ETF. It has also outperformed going long the S&P 500 by a factor of nearly 400%. Nothwithstanding what to me was the onset of a consumer spending recession and an obviously overvalued stock market, LB at the time was overvalued relative to both the stock market and the retail stock sector:

The traits specific to LB, and that is based on information that is freely available to anyone who is motivated to do the research, included:   a stock priced for perfection, aggressive debt issuance to finance huge share repurchases, heavy insider dumping of shares into the share repurchases and a stock valuation far in excess of industry peers.

Despite the inexorable grind higher in the Dow, SPX and Nasdaq indices, hundreds of stocks are either at 52-week lows are getting ready to embark on a “price-seeking” mission to find their 52-week lows.  Just ask the Dick’s Sporting Goods (DKS) or Advance Autoparts (AAP) bulls.  LB, DKS and AAP are examples of stocks will get cut in half at least two more times in the next 12-18 months.

The Short Seller Journal was launched with the goal to expose the truth about the stock market and the truth about the manipulated economic and earnings reports fabricated with the intent to support the most over-valued stock valuations in history and, more important, to use those truths to find short-sell ideas that will outperform long strategies. LB is an example of the types of ideas uncovered by the Short Seller’s Journal.

You can learn about this newsletter here:  Short Seller’s Journal information.  There’s very few, if any, newsletters that focus on shorting the market.  The best time to invest in a market theme is when the rest of the market is doing the opposite.  As a testament the quality of the Short Seller’s Journal, the subscriber turnover rate is remarkably low. There’s no minimum required subscription period and subscribers receive a 50% discount to the Mining Stock Journal.

 

Shorting Alpha: Short Seller’s Journal Update

Subscribers to my Short Seller’s Journal who took advantage of the two ideas presented in the latest weekly issue are up 11.7% on the long term short-sell play and 13.6% on the “Quick Hit” idea.  The option play I recommended is up 135%.  In comparison, the S&P 500 is down 4.8% this week.     Short Seller’s Journal

The long term short-sell play is an extremely overvalued stock that offers a way to short SubscriptonGraphicWall Street.   The “Quick Hit” idea was stock that ran up last for absurd reasons and I thought would sell off a lot more than the market this week if the market was weak.  It is also insanely overvalued but was suggested as a one week trade.

 

Is Amazon Done? “Regression To The Mean” Could Cut AMZN In Half

Fantastic write-up! I was a former financial statement auditor for a big accounting firm in the Silicon Valley during the tech bubble. I audited many of the high fliers that crashed and burned, took companies public & was at the printers the day the bubble really burst.  So, when I say Amazon’s financials are the most misleading and misunderstood I’ve ever seen and their stock will crash mightily, we sound like we’re on the same page.  – Former tech company CPA who follows my work

Click here to access this report:  AMAZON dot Con

A reader of my report sent me the following Fibonacci analysis of AMZN’s stock, which has clearly gone parabolic on bubble helium:

AMZN_Fib1 (Click to enlarge)

AMZN’s move in price is in no possible way supported by the underlying business and financial fundamentals. Contrary to Wall Street pimp reports and manipulated AMZN earnings presentations, AMZN is highly cash flow negative and will continue to be for the foreseeable future.

When the rug is finally pulled out from under Amazon, it will be revealed for what it really is:   an online version of a big box retailer, only this “online” version has the worst operating margins in the industry and burns cash like a Fukushima nuclear inferno.

My report shows in fine detail how AMZN promotes its financial performance in a highly misleading way – bordering on fraudulent.  I explain why AMZN’s business model burns cash and continues to lose money even on a GAAP-manipulated net income/loss basis.  I also offer capital management advice and put/call strategies, with specific examples.

You can access this report here:   AMAZON dot CON

After reading your commentary about Amazon on 7/24 I immediately bought two Jan 16 put options and also purchased your report. To say your report was an eye opener is an understatement. You clearly show that Amazon’s financial structure is a house of cards. Later on 7/30 I added a third put option. As of Friday 8/7 I am up 29% on the position. All I can say is thank you for all that you do!  – “Bill” in North Carolina

July New Home Sales Tank

July is typically the 2nd or 3rd best month of the year for home sales.  This should especially be true  this year given that mortgage rates are at their lowest in almost a year and the banks are relaxing credit standards.  But today’s new home sales report showed the lowest monthly rate of sales since March and it was well below the sales rates reported during the so-called “polar vortex” months.

I have presented a detailed analysis of new home sales which you can read here:   July New Home Sales

One of the best areas to make money in the stock market right now is in shorting the homebuilder stocks.  These stocks are insanely overvalued based on historical fundamental market metrics.  This is an incredible opportunity to take advantage of a sector of the market that is not widely followed.  The big mutual and retirement funds holding long positions have their head in the sand are not compelled to sell, especially since the general stock market hits new record highs everyday.  HOWEVER, the homebuilder sector per the DJUSHB is down nearly 13% since it hit a peak in May 2013 while the SPX has risen nearly 20% in the same time period.  What does that tell you?

I have two homebuilder short ideas for which I’ve written a detailed fundamental analysis in support of my price targets for these stocks.  Both plays offer significant profits if you are patient with the market and let the fundamentals blow these stocks up.  I have included a section on call and put option strategies in the second report.  You can access them here:  Homebuilder stock short-sell plays  or by clicking on this picture:

HousingBubblePic