Shorting JC Penney (JCP)

It comes down to the quality of JCPenney’s management.  If you judge management based on its results to date (e.g. 21.7% drop in same-store sales), management has been shockingly bad.  Basically, the longs think that JCPenney is a turnaround story and the shorts think that JCPenney is one of the worst managed retailers.  The short trade may be a little crowded as 41.5% of the float is sold short.  In my opinion, stocks with short interest above 20% are usually seriously flawed and the shorts will be right in the majority of cases.  However, history has shown that life is unkind to short sellers and that short selling common stock is not a good way of making money.  There are books on this… Mr. Sauer worked at a long/short hedge fund that blew up and David Einhorn got burned shorting Allied Capital.

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Barkerville Gold Mines (CVE:BGM)… where to begin

Remember how Bre-X had a potential of up to 200 million ounces?  Well let me introduce you to Barkerville Gold Mines.  According to Barkerville’s press release, it has a “geological potential” for up to 65-90 million ounces of gold.  (Cue laughter.)

Energold Drilling Corporation: this may end badly

UPDATE:  This post is wrong.  Please see the updated post.

Imax: short thesis

The main reasons to short Imax (in my opinion):

1. Overvalued.  The P/E ratio is roughly 50 (higher if you ignore profits from tax-related reasons).
2. They are close to saturating their markets and therefore Imax’s profits will start dropping in the future.
3. Historically, the company has not made money and still has negative retained earnings.  The economics of its niche is not good.
4. Slightly aggressive accounting that inflates profits.

I don’t think that I am the only person with this idea as Google Finance shows that Imax has 65.89M shares outstanding and the short interest has shot up to 12.2M shares short (see NASDAQ site).  That’s roughly 18.5% of outstanding shares short.  The borrow is very cheap.

My quick take on PRXI (Premier Exhibitions)

I just don’t think it’s deeply undervalued.  (VIC writeups here and here.)

1- In theory, its Titanic assets are worth a lot.  However, you should read the court filings for yourself.  If Premier Exhibitions wants to sell the Titanic artifacts, it has to sell all of them together.  It cannot sell them separately.  This will make them difficult to sell.  On top of that, Premier will want to lease/rent back the artifacts that it is using for its successful Titanic exhibition.

Premier for a long time has been trying to get permission to sell the artifacts piece by piece.  The judge is NOT happy with them for trying to do this.  I suspect that the judge’s emotions will rule the day and Premier will not get what it wants.

From the buyer’s point of view, the demand may be questionable.  You have to pay ~$200M to buy the artifacts and you are obligated to maintain them (if you cannot maintain the artifacts, you will not be allowed to buy them).  And what is their utility?  I only see somebody buying them for the same reason they buy a piece of artwork.  However, to exhibit these artifacts in your house… you will have to rotate the artifacts in/out to prevent damage associated with exhibiting them (as is the case with the Titanic exhibit).  Is there a market for this?  Maybe.  But figuring out the market for this asset is too hard for me.

2- Management: The old management was very good at running an exhibitions… the new one not so much.  That is why Premier will not be able to maintain its historically high returns on equity.  This is a business where Premier doesn’t have any special advantage or economic moat.