Short candidates for the upcoming bear market

The anticipation of the end of QE this month and the start of rate hikes next year has prompted the market to do a correction and has moved volatility into multiple year high territory. This may very well be a multi-year top being formed. And so we should use the current rebound to look at some good short candidates for a bear market.

I have some long bets (mostly AAPL and BIB) and I would like to hedge them using some shorts (put options). My ideal short is:

  • high flyer/close to a recent all time high;
  • has a broken model, or at least losses or an impossible high P/E and PEG;
  • has lost a lot of value during the Sept-Oct correction;
  • as high beta as possible.

So far I found the following:

Screen Shot 2014-10-23 at 19.12.02

The most interesting to me are:

ETFC – E-Trade is an online broker that will fall quickly when it won’t be profitable for retail investors to be long in the market anymore.

TSLA – Apart from their bet on self-driving cars (which is still a number of years away) they don’t have much growth coming, are still not profitable and overvalued. They fell a lot in the recent correction and even Elon Musk publicly admited that they are overvalued. I still like their vision and I am very sorry for listening to Cody and not betting on them at $77 as I wanted to. But now they must come down to Earth, especially in a bear market.

EBAY – Just pleased Icahn and decided to spin off PayPal, which is being disrupted by Apple Pay and its value has colapsed. And the online market business is attacked by BABA and AMZN. And they are not profitable. So there.

BABA – A lot of speculators here. And more shares coming to float in the next months. And overvalued, though their PEG is not as bad as Amazon’s. Little history, little insight into corporate governance, so wild card, but I guess in a bear market it will fall a lot.

YHOO – Profitable but overvalued and with low growth, and their only prop is the fact that they still own about 10% of BABA and the cash from selling another 15% at IPO.

LNKD – It’s been around forever, and I never liked it. They sell services to recruiters, but they are not profitable. But it fell already.

SONC – this smaller cap greasy cheap food chain shorted by Cody is priced to perfection while its business model is under attack from the green/healthy food movement. Profitable and with a big short ratio, it may continue to surge for a while.

NFLX – pressured by the cable operators with which they need to partner while they intend to disrupt, and not able to offer latest movies because of its cheap rates, NFLX has lost a lot after its last report and may rebounce a little, but its high valuation will come under attack in a bear market.

What do you think guys? Any edge on these stocks? Any other short ideas?

The case to short YHOO

Stock Quote YHOO.

Yahoo e un dinozaur din alta epoca. La inceputul Internetului, in anii ’90 cand site-urile erau rare si navigarea printre ele era lenta, Yahoo s-a impus rapid ca o colectie in continua crestere de link-uri, un director care la un anumit moment isi propunea chiar sa fie universal. Cand a ajuns imens, bloated si greu de navigat a fost disrupt prompt de Google cu a lui cautare minimalista. Apoi s-a tarat in ultima decada, ramanand in viata doar datorita serviciului de mail din care e greu sa te muti (nu exista portabilitate) si a parteneriatului strategic cu Apple la lansarea iPhone.

In urma cu cativa ani un Yahoo in deriva a angajat-o pe Marissa Mayer de la Google ca CEO. Tipa a adus ca nr 2 un alt angajat Google pe care il platea chiar mai bine decat pe ea. Saptamana trecuta insa tipul a fost dat afara pentru ca nu a avut rezultatele scontate in a atrage reclama platita.

Trendul actual, de dublare in 8 luni, e complet nesustenabil, actiunea e mult prea scumpa si probabil ca earnings-urile urmatoare vor marca inceputul caderii. Ovidiu zice ca e momentul sa il shortam. Ne bagam?