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Short Ideas?


mcliu
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I agree that Splunk's valuation seems very high and a lot of the points about potential competition and business model seem valid. However the bearish stuff I read about splunk is generally full of errors and other indications that the authors don't understand the space or the company.

 

http://seekingalpha.com/article/900021-new-competition-challenges-splunk

 

"Just today, Lending Club hired Oracle for its ERP software when it could've hired Splunk." What?

 

http://www.marketfolly.com/2012/10/zack-buckley-shorts-splunk-value.html

 

"The company monitor's web traffic". Not exactly.

 

When they first IPO'ed I read another article that said they did mobile analytics.

 

Like I said it seems way overvalued. But don't blindly follow someone into this short because it seems like the vocal bears don't really have this in their circle of competence from what I have seen.

 

Zack Buckley also lists SAP and EMC as competitors to Splunk. It has been a little while since I have been involved in product selection for log aggregation/analysis. But I have never seen either of these companies come up in this space and even after looking through their website could not find an offering that competes with Splunk (anyone know what he is talking about). Companies like Oracle/SAP generally sell solutions that require lots of custom tweaking and setup, where as Splunk's product is intended to be setup and configured by your average IT guy.

 

Also Splunk does have a hosted solution for cloud based applications. I have no idea how the product is doing. But that was another thing ZB highlighted was lack of a SAAS offering, which may not have been released when he presented the idea.

 

 

 

 

 

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Does anyone have any good short ideas?

 

LNKD, CRM

 

Both are doing well with their business, but have such a rich valuation, that they bound to go down  -- i haven't short them yet, the problem with shorting is that market can stay irrational than you can stay solvent .

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Tesla put options.

 

1- They are losing a lot of money.

2- Management says that they are going to lose money (read their press releases carefully).  They will not be GAAP profitable next quarter, cash flow will be awful, etc.

3- Imminent catalyst: the DOE loan is due in around a year.

4- Valuation is high.

5- The options, while not cheap, aren't crazy expensive.

 

Almost everything you can ask for in a short position.

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Tesla put options.

 

1- They are losing a lot of money.

2- Management says that they are going to lose money (read their press releases carefully).  They will not be GAAP profitable next quarter, cash flow will be awful, etc.

3- Imminent catalyst: the DOE loan is due in around a year.

4- Valuation is high.

5- The options, while not cheap, aren't crazy expensive.

 

Almost everything you can ask for in a short position.

 

Regarding the loan: http://www.teslamotors.com/blog/early-repayment-tesla’s-atvm-loan

 

Or is that a different one?

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giofranchi

 

“As time goes on I get more and more convinced that the right method in investment is to put fairly large sums into enterprises which one thinks one knows something about and in the management of which one thoroughly believes. It is a mistake to think that one limits one’s risk by spreading too much between enterprises about which one knows little and has no reason for special confidence.” - John Maynard Keynes

short-candidates_1.pdf

short-candidates_2.pdf

short-candidate_3.pdf

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Does anyone have any good short ideas?

 

1. Amazon

 

2. High Yield (Junk)

 

3. JGBs

 

4. HLF (Just Kidding!)

 

4. NFLX

 

5. Direxion 3X ETFs trending near 52 week highs

 

I have alway been interested in buying long dated puts on ETFs that suffer from decay. Have read about this strategy WRT USO ( http://beta.fool.com/sumzeroresearch/2012/01/24/going-short-uso/1189/ ).  If I remember correctly a lot of the good short candidates in this space have high borrowing fees.

 

What are the gotchas to watch out for when shorting ETFs that suffer from decay?

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Sherwin Williams (SHW).  Company is trading at 25 year highs in terms of multiples.  Multiples much higher than competitors. 

 

Friends who work there have alluded to management being potentially over-focused on short term stock movements.  In addition, management is extremely well compensated.  CEO Connor made $35.7 million between 2007-2011.  This compares to $32.3 million made over the same period by Immelt at GE (a company 10x+ in size).  This is also over a period where EPS declined from $4.84 to $4.22!

 

Overall though the company fundamentally has performed well and is run fairly conservatively.  They consistently return cash to shareholders. 

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Verizon is something that is trading at high multiples, paying out a dividend at an unstainable rate, and burdened with high capex obligations. 

 

That said I don't understand enough of the ownership structure of its investments (such as verizon wireless) to confidently take a position.

 

Anyone care to defend the bull perspective on Verizon?

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What are the gotchas to watch out for when shorting ETFs that suffer from decay?

Buy-ins, trending markets (can cause the ETF to go up 3-4X or more), short squeezes.

 

If the ETF were to suspend its arbitrage mechanism for some reason (this happened with UNG, which is not a leveraged ETF), a short squeeze could occur.

 

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Hmm I might be wrong about the maturity date on that loan.  It looks like it will be repaid between now and Dec 2017, unless the loan is amended.

 

For the most post, everything from Tesla is extremely promotional.  Tesla is prepaying the loan early because it has to, not because it volunteered to do it.  The interest rate on the loans are extremely attractive (and could arguably reflect a hidden asset).

 

Because it is the government that gave out this loan, funky stuff could happen.  The loan may not be as dangerous as I hope it will be... the US government could conceivably give Tesla more slack.

 

DOE Loan Facility

On January 20, 2010, we entered into a loan facility with the Federal Financing Bank (FFB), and the DOE, pursuant to the ATVM Incentive Program. We refer to the loan facility with the DOE, as amended, as the DOE Loan Facility. The DOE Loan Facility requires, among other things, that we comply with certain financial covenants and fund a debt service account. The financial covenants include a minimum current ratio, which is a ratio of our current assets to our current liabilities (taking into account certain categorical exclusions); a minimum fixed charge coverage ratio, which is a ratio of consolidated adjusted EBITDA to consolidated fixed charges; and a maximum ratio of total liabilities to stockholder equity. The DOE Loan Facility was amended in June 2011 to expand our cash investment options, in February 2012 to modify the timing of certain future financial covenants and funding of the debt service reserve account, in June and December 2012 to allow us to effect certain initiatives in our business plan. In September 2012, we entered into an amendment with the DOE that: (i) removed our obligation to comply with the current ratio financial covenant for the third quarter of 2012; (ii) amended our funding requirements for the dedicated debt service reserve account to (a) postpone until February 15, 2013, $14.6 million of the $28.8 million pre-funding payment originally due on October 15, 2012; and (b) make additional pre-funding payments, beginning June 15, 2013, of between $14.2 million to $14.5 million each quarter to pre-fund the quarterly principal and interest payments due from September 15, 2013 through December 15, 2014; and (iii) added a covenant requiring us to work in good faith with the DOE to develop an early repayment plan for our outstanding DOE Loan Facility on terms satisfactory to the DOE. We entered into another amendment with the DOE in March 2013 that, among other things: (i) modified certain future financial covenants; (ii) accelerated the maturity date of the DOE Loan Facility to December 15, 2017; (iii) created an obligation to repay approximately 1.0% of the outstanding principal under the DOE Loan Facility on or before June 15, 2013; and (iv) created additional contingent obligations based on excess cash flow that may result in accelerated repayment of the DOE Loan Facility starting in 2015. The original amortization schedule for the DOE Loan Facility is not affected by this recent amendment, and so the debt service payments remain the same until the new maturity date when all outstanding loans under the DOE Loan Facility are to be repaid.

 

 

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Regarding Tesla I think you should watch Bloomberg's Risk Takers on Elon Musk, just to get an idea of the kind of management you're dealing with..

 

What about the lock up period that will expire at Workday (WDAY)  in April??

 

 

Consider this: For the six months ended July 31, 2012, Workday reported a loss of $1.40 per share on revenues of $119.5 million, compared with a loss of $1.27 per share on revenues of $54.8 million for the same period a year ago.

 

And Thomson One Analytics had something to say. For the year ended Jan. 31, 2012, Workday reported a loss of $2.71 per share on revenues of $134 million. For the year ending Jan. 31, 2013, Thomson One estimated Workday will have a loss of $2.75 per share on revenues of $292 million. For the year ending 2014, Thomson One estimated Workday will have a loss of 76 cents on revenues of $511 million.

 

April 10, 2013, when Workday’s 180-day lockup period expires, assuming the insiders haven’t sold stock before then.

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Look for companies with Piotroski's F-score <=3, P/S>1 and 1yr. asset growth > 10% (the so called Montier Shorts).

 

http://www.safehaven.com/article/10348/joining-the-dark-side-pirates-spies-and-short-sellers

 

Right now, by market cap order, good "statistical" short candidates are Apple, Baidu, United Technologies, Eaton Corporation, Apache, salesforce, Broadcom, and many, many more in the US. In the EU zone, only Caixabank, BME.MC, GSW Immobilien and few more.  That shows that there is a lot of optimism in the US, very little in the Eurozone. The Shiller P/E is also around 40% lower in Europe than in the US. 

 

By the way, according to these criteria, Tesla is clearly a short candidate. 

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I'm a bit late on this one but I saw splunk in  the list.  I would just say, for what it's worth, that the people I know who use it really like their software.  It is for doing enterprise search.  Sort of like a google but for your IT department's log files and such.  I don't mean to justify it's valuation, I fully agree it's extreme, just wanted to add my experience with it.

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Thor Industries - THO

 

Channel stuffing like crazy. The company just missed earnings and guidance. That industry is not really growing and there is so much supply of used inventory, dealers are having a hard time selling at SRP, discounting is rampit. Very likely this miss in the next 2 qtrs imho

 

http://online.barrons.com/article/SB50001424052748704379604578185620696969506.html#articleTabs_article%3D1

 

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