I don’t have anything really novel. I’m a real estate guy so this isn’t my speciality. So I don’t think anyone should take my advice being just a retail equity investor.
My personality lends itself to being anti-fad. Always has. This was what led me to use a Mac in 1998 when everyone told me Macs were crap. It’s what makes me a bit skeptical about Apple’s future today.
But what I usually do when looking for shorts is screen for companies that are too big to be bought out but are generally trading at rediculous PE multiples and with only one real source of earnings which I think will be vulnerable in the porter sense.
So I like to see a market cap of >5 billion because it gets hard for someone to buy them out there.
Perhaps PE of >20 or undefined even.
Double digit growth in stock price preferably with a large cost in shares. The 300 dollar per share NFLX circa last July is probably the best example of what I am try to get at.
I buy puts in these that are generally long dated but well out of the money and sit and wait for them to have their Einhorn moment.
On the long side, I’ve been basically long AAPL and emerging markets since I was in college. I am not anymore. I’m really struggling to come up with a good long strategy going forward.
Last year I was dead on for NFLX, RIMM, GMCR, and BAC which I told you guys all about at the time. I also bet against LNKD and didn’t get anywhere with that and CRM which so far I have been dead wrong about. I’m still buying puts on those as we speak.
I do have less objective things. I told you about my sales trader buddies in an earlier thread.
Also, when I see that something has caught on here in India and is suddenly uber cool that can be an indicator that that the fad has jumped the shark and is about to die. I noticed this around a year and half ago when my driver bought a blackberry and Vodafone was marketing the “Blackberry Boys” campaign to everybody, not just the businessmen. As soon as you give everyone one of these things nobody wants it anymore. Don’t they get it? It’s jewelry. See Nokia for details.
I knew that NFLX was doomed when they announced that they were expanding into the emerging markets. This is because bandwidth is expensive here and connections are not fast for most people to view decent media. Furthermore, you can buy pirated DVDs everywhere much more easily for much less money than it would cost you to illegally download the movies you want to watch let alone pay for them legally online. I heard that and said, yep they can’t grow in the US anymore so now they will try and go global. Sell.
Anytime, I hear the CEO’s of one of these growth company’s brag on CNBC that they are expanding into BRICS (particularly Russia and India which are two countries I know very well) I immediately red flag them.
When I moved to India 6 years ago most Indian websites didn’t even work with a browser other than Internet Explorer. Literally, you’d go to citibank india or vodafones website with firefox and get an error message because it isn’t compatible with anything except Internet Explorer. I literally had to fire up a windows emulator to pay my phone bill online because whatever batshit old javascrpt these websites worked on wasn’t compatible with Apple or Firefox or Safari. The IT guys who came to install my connection told me that their network didn’t work with Apple software. I told them yes it does and showed them how. Well, that has all changed.
Now every book in every book store is how to be like Apple. Everyone has iphones. Everyone has ipads. So, here I am thinking that the AAPL might have a worm in it. I’m unsure about apples future. Until I really get where they are going and it is more compelling than “the cloud” I am going to be very unsure about that bohemoth. Especially when I see all the IT kids here now parading around their macbooks.
Oh by the way, the CFA charter is all the rage here in India. There are CFA prep schools all over this town. There is one even advertising tutoring in for it led in Marati downstairs in my building. Short CFA.