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The Shorting of Frauds, Overhyped and Bankrupt Stocks Journal
- Thread starter Daal
- Start date
http://seekingalpha.com/article/1080991-the-short-case-for-new-york-times-co
NYT is a nice potential short
NYT is a nice potential short
Quote from Daal:
HLF is setting up for a monster bounce play QCOR/BPT style at some point next week. There is a huge seller just smashing every rally today
I ended up making a bit on the HLF bounce. I'm now long LPH, same thesis
When everybody and their mothers are shorting a stock and the stock is down huge on long-term thesis its often a good idea to buy, it doesn't matter how worthless the stock is, it will find buyers and shorts will cover as well. The exceptions are
-Stocks in a liquidity crisis
-Stocks that have a near-term catalyst for a immediate collapse (bk filling, SEC halt and things along those lines)
Other than that you got to buy super volume washouts everytime. Best strategy to play these is to scale in the position without stops. Matter of fact on HLF I made less than I should have because I used stops and ended up panicking on the first try. Averaging in is the way to go. Control risk through the position sizing. If the stock goes to $0 then you were wrong about the no near-term catalyst issue
When I say near-term catalyst I refer to something other than the momentum selling. Often these stocks will continue to go lower, perhaps much lower even though there is new info out about the company. That is fine, when the bounce comes it's usually very significant
Usually the more scared you are to buy the better
Usually the more scared you are to buy the better
Regarding going long LPH, and also other similar Chinese stocks, these carry far greater risk than HLF.
I have strong memories of PUDA. The report came out, and I think it was the same afternoon that it was halted, which lasted for months. Then it reopened down by a massive amount.
LPH could be the same situation, which is the second scenario you describe:
"Stocks that have a near-term catalyst for a immediate collapse (bk filling, SEC halt and things along those lines)".
****
Separate to that, after reading a few neutral / bullish reports on HLF, I covered my (small) short in the high 20s. With the benefit of hindsight I could have gone long, and/or sold a put spread. But still I am grateful to Mr Ackman for providing the catalyst for the big plunge in the stock, regardless of where HLF goes in the long-term.
I have strong memories of PUDA. The report came out, and I think it was the same afternoon that it was halted, which lasted for months. Then it reopened down by a massive amount.
LPH could be the same situation, which is the second scenario you describe:
"Stocks that have a near-term catalyst for a immediate collapse (bk filling, SEC halt and things along those lines)".
****
Separate to that, after reading a few neutral / bullish reports on HLF, I covered my (small) short in the high 20s. With the benefit of hindsight I could have gone long, and/or sold a put spread. But still I am grateful to Mr Ackman for providing the catalyst for the big plunge in the stock, regardless of where HLF goes in the long-term.
Quote from m22au:
Regarding going long LPH, and also other similar Chinese stocks, these carry far greater risk than HLF.
I have strong memories of PUDA. The report came out, and I think it was the same afternoon that it was halted, which lasted for months. Then it reopened down by a massive amount.
How often does the SEC shutdown frauds quickly? If they get this one I will consider myself unlucky. Usually it takes months, FSIN was a total fraud and got bought out
Quote from Daal:
How often does the SEC shutdown frauds quickly? If they get this one I will consider myself unlucky. Usually it takes months, FSIN was a total fraud and got bought out
You're right, it is rare that the SEC act quickly on these types of stocks.
However from memory in the PUDA situation it was the board that initiated an investigation.
Either way, it really just comes down to risk management. If you take a small enough position, then if
(1) the stock reopens today or tomorrow and doesn't bounce (much)
or
(2) the stock is halted for weeks/months, then goes lower
it won't matter too much.
Quote from m22au:
You're right, it is rare that the SEC act quickly on these types of stocks.
However from memory in the PUDA situation it was the board that initiated an investigation.
Either way, it really just comes down to risk management. If you take a small enough position, then if
(1) the stock reopens today or tomorrow and doesn't bounce (much)
or
(2) the stock is halted for weeks/months, then goes lower
it won't matter too much.
I agree