Another Sino-forest or Green Mountain Coffee?

Stock went down more than 20% after Einhorn’s questions during the conference call. I’ve never heard about the company before and it was around $8 billion company before the drop.

I’ve really enjoyed Einhorn’s book on Allied Capital and have an impression that he knows what he’s talking about before making such an annoucement.

What do you guys think? The company has plenty of room to go down…

I didn’t hear the call, but GMCR was a classic short just like NFLX or CROCS. These guys do seem to have less room for downside than those.

I would be wary of getting involved after he’s already made his statement. The stock has dropped by 20 percent yesterday. In the GMCR example it had a lot more to drop, but I was already short and pleading the GMCR short scenario on here for some time.

This one wasn’t on my radar, which is odd, because I spend a lot of time finding shorts and have had a lot of similar ideas as this guy.

I personally really like the herbalife business in general. I’ve not used their product, but I think anything that helps fat people lose weight is a cash cow. I mean, selling food to fat people in a subscription under the guise of making them skinnier. It’s so easy it should be illegal. It’s like cigarette companies being able to sell cigs to kids.

tikka, i notice you talk about “fat” a lot…is that weighing on your mind?

Haha, absolutely. I would love nothing more than to be a somoan islander and free to just get huge. Jesus I love eating. But yeah, on a diet. Keeping svelt.

Tikka -

You mentioned that you spent a lot of time looking for shorts. What sources or how do you find those shorts?

Any particular method or strategy do you use?

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.

Thanks - very interesting. I will def. see if I can find some good shorts using your method.

I just saw that GMCR is down more than 40% after the market today given their disappointing financial results. I mean it used to be trading around $120 a few months ago…It’s just crazy.

Yeah, I grew up in Stowe, Vermont, which is essentially where they are based. They sold their expensive coffee to yuppies from NY at the ski lodge cafeteria. Boy did those yuppy pricks love them some Green Mountain Coffee.

I used to kick myself for not investing in them, but I was quite young then. For a long time they were the single best performing stock on the Nasdaq over a 10-15 year period or something like that. Up like a quadrillion percent from their ipo.

Then I forgot about them.

It was last year that they came up in a screen and I couldn’t believe that they had a market cap of 15 billion that was on pace to be bigger than starbucks in a year or two. Worth about 15 billion dollars they couldn’t double in price and nobody could buy them out so I coudnlt really see where the growth potential was. I felt like Rip Van Winkle.

In India, we don’t do K-Cups. This is because we have armies of people to make us tea and coffee. No need for overpriced k cups. In fact. If I hear that GMCR is expanding to India, I will definitely short them again. This goes for a lot of western businesses that I hear about on CNBC with CEO’s like Reed Hastings saying, “Yep, we’re entering the Indian market.” This means they are out of ideas on how to grow domestically. SELL!

So i figured out that they had this K-Cup thing and that every yuppy asshole had one. I called up my brothers who are all doctors and 3-3 of them were using them in their offices. Their patients are all yuppy assholes.

Then i figured out that their patent was due to expire in 2012. Then their CFO resigned in a hurry. It was so plainly obvious.

LULU is one that frequently comes up in my screens. I still don’t really understand this company very well. But what I do know is that its market cap is around 12 billion dollars. Compare that to the GAP (which owns Gap, Banana Republic, Old Navy etc) wihch is only about 14 billion dollars and really the only other comparable retailer bigger than it. It has a P/E ratio of around 60 something and has double in price this year. It’s only got a 174 stores in the US, Canada, Aus, and NZ. So yeah definitely some room for expansion there without tarnishing the snob appeal of their brand.

So who shops there? I’m pretty sure it’s yuppy bitches pretending to be yoga enthusiasts. In any case, when they find a new brand. Lights out. This thing will drop straight down to the value of something like Express (2 billion).

So really I’m just waiting for a signal. Lulemon is apparently inspired by Yoga and India. Although, I’ve noticed that so far they do not sell clothes here. When they announce that they are opening up stores in India I will put in the put order. Why? Because Indians don’t wear sportswear when they do Yoga. Literally, your yoga teacher comes to your door in the morning wearing a button down shirt and trousers just like you would to your office.

Really, based on what little I already know I’m ready to do it. Someone tell me why I shouldn’t. Really, what can I lose?

I think that all it will take is a little bit of a push from someone like Einhorn or Herb Greenberg. They will need some sort of justification to slag it off and it won’t really matter what.

Ok here it is:

International expansion. They are considering Hong Kong. Not quite India, but close enough.

Clearly they ran out of rich yuppies pretending to be spiritual hippies in the US and are now seeking them elsewhere.

how is hong kong close enough to India? one is a properous city, the other is backwards with living standards of the third world…

Lulu is worth about 25 percent of Nike. Really? Is that what they think this thing will become?

i agree it is not in line…i love nike…top 10 companies in the world for me…perhaps a good short idea actually…we should regroup on this…stock already looks mighty expensive…