The Shorting of Frauds, Overhyped and Bankrupt Stocks Journal

Daal, as per your thread title, what do you consider it to be? NAV has negative book value, but does fine in liquidity currently. There are also zombies such as YRCW which has been diluted to death.

Anyways off my contrarian list, have a look at:

FSLR
NOK
RSH
SHLD

Also, have a look at the coal names: PCX, ACI, ANR etc.
 
Quote from m22au:

PCX April 2018
http://cxa.gtm.idmanagedsolutions.com/finra/bondcenter/BondDetail.aspx?ID=NzAzMzZUQUM4

ATPG May 2015
http://cxa.gtm.idmanagedsolutions.com/finra/bondcenter/BondDetail.aspx?ID=MDAyMDhKQUU4
More...

PCX I'm not comfortable shorting, any up move on Nat Gas could send these stocks soaring(I believe that is the reason coal stocks tanked)

ATPG looks like a highly likely bankruptcy candidate. Current liabilities are 2x current assets but its supposed to be more. Last quarter the company raised long-term debt to increase its cash. It seems that the management is rolling the dice trying to save the company
What I'm concerned here is again, exposure to nat gas. I don't like bankruptcy thesis that depend on the price of a energy assets going to or staying at multi-year lows, specially when everyone thinks it can't rise

Perhaps the micro situation will overwhelm the macro. I will read their fillings to see if I can clear that up
 
I read ATPG 10-Q and it seems that they are engaged in some kind of GMnomics. Almost every year since 2007 their capex(yellow) has exceeded their operating cashflows(blue)

chart


They make up the difference borrowing and selling assets(by giving away rights to future production, royalties and the like). They are burning the furniture to keep the fire going

But I wouldn't short the stock now. They don't have to go bankrupt anytime soon given that they can keep selling stuff, its bad for shareholders in the long-run but for a stock with almost half its float shorted I'm not exactly thinking about the long-run, specially given its sensitivity to nat gas and oil

I might short a big rally, though
 
Quote from jj90:

Daal, as per your thread title, what do you consider it to be? NAV has negative book value, but does fine in liquidity currently. There are also zombies such as YRCW which has been diluted to death.

Anyways off my contrarian list, have a look at:

FSLR
NOK
RSH
SHLD

Also, have a look at the coal names: PCX, ACI, ANR etc.
More...

FSLR stock is down huge, liquidity is fine, GAAP solvent and history of profitability(retained earnings positive). I would have to know more about the future of the solar industry to be able to short this

NOK I don't like to short. If you look at the balance sheet a few things stand out. Current assets is quite a bit higher than current liabilities. $11B equity compared to $10B market cap, also $10B of retained earnings(this means they have a history of profitability). So this is mainly a long-term product decline play, I don't know enough about mobile technologies, cell phones, etc to know if they are doomed. They could be acquired too, is that realistic?I don't know, have no idea so I rather not get involved

RSH, similar to FSLR, liquidity is fine, GAAP solvent and history of profitability. Also revenues are at the same level since 2007, business not collapsing enough(profit margins are declining but I don't want to guess where they are going to go). Liquidity can go away if they had issues with suppliers but I don't think the business is collapsing fast enough
attachment.php


SHLD seems like a decent short. Current liabilities are close to current assets and Retained Earnings is collapsing to 0(This shows the company has a history of being in trouble). GAAP equity is also collapsing. Revenues and margin are in long-term decline
attachment.php


I also plan to buy lots of JCP stock soon, SHLD might provide me a good hedge since I believe there will be a recession or a quasi recession in the US
 
Quote from jj90:

Daal, as per your thread title, what do you consider it to be? NAV has negative book value, but does fine in liquidity currently. There are also zombies such as YRCW which has been diluted to death.

Anyways off my contrarian list, have a look at:

FSLR
NOK
RSH
SHLD

Also, have a look at the coal names: PCX, ACI, ANR etc.
More...

ACI doesn't seem all that unhealthy. Rising revenues from 2007, operating margins are hanging in there. Retained earnings that is rising

ANR has strong revenue growth, seems that low nat gas killed their margins. A reversal on nat gas should bring this company back to profitability. Essentially its a bearish bet on nat gas expressed in an contrarian asset with a positive risk premium. I don't want to get involved. Specially given that ATPG is so much worse
thanks for bringing this ideas
 
I remembered a issue that shorting SHLD carries. They own a lot of real estate that is undervalued in GAAP books. This means they will realize a profit if they sell

In theory they can keep the game going for a long-time selling off assets. I remember this was one of the thesis behind the Lampart play, he got hurt by WMT but the company doesn't necessarily needs to go bust soon. I'm not sure its a breach of debt covenants to sell stuff. Would have to do more work there
 
I was reading the 1st chapter of this book
http://www.amazon.com/gp/product/04...=1789&creative=390957&creativeASIN=0470452544

and I came across what I believe is golden advice that might help me short these type of fraud/bankrupt stocks

1-Do put backspreads in order to build a bearish position while being vol neutral. Its so obvious I don't know why I didn't do it before. You short an ATM put and use the money to buy many OTM puts. If the stock rises you break even, if it crashes you profit. If it just goes down a bit you lose. But the whole idea behind these stocks is that they will crash big. This helps me finance the position without overpaying for the options by a huge amount

2-This is somewhat related to the 1st. He says option market makers sometimes get annoyed when you front run their bid and asks with a better bid or ask with a small size and they sometimes fill you just to get rid of you. I will experiment with this. I learned that it pays to be patient with limit orders in options. Some of these garbage stocks have quite wide bid ask option spread. The right play is to step up the bid or ask and wait. If the MM takes you out because he is annoyed that is nice, if he doesn't at some point someone will. If nobody does, fine, no play. Its like getting a good hand in poker and everybody folding, move on
 
Long back-spreads are the standard of vanilla hedging. A good rule of thumb is to go as narrow as possible on strikes (limit skew risk) and maintain a small credit or debit.
 
You must log in or register to reply here.
Back
Top