This post is a list of short ideas, sorted by market cap. The borrow on these stocks is generally 10% or lower. Some of the more interesting shorts are AMD, PVG, TMR.TO, CRC, Chinese reverse mergers, and CGIP.
Key points in CONN’s latest 10-K
- Omitted the static loss table found in previous 10-Ks and 10-Qs.
- Removed the following sentence: “Under our current policy, the maximum number of months an account can be re-aged over the life of the account is limited to 12 months.”
I guess I will continue to hold my short position in CONN. While I don’t entirely know what’s going on, this does not smell right. (*The borrow is expensive.)
Google Trends may be an interesting tool for investors.
- It allows investors to gather data on a company that’s fresher than the last quarter’s earnings release. This can be helpful in turnaround situations such as Aeropostale (ARO) and Cafepress (PRSS).
- Having leading earnings indicators can be helpful for manufacturing companies (e.g. RGR, SWHC) where there is not much data on consumer demand due to fluctuating inventory at the retail and distributor level.
- In rare cases where fraud is suspected, Google Trends may provide some indications about actual revenues.
Here is an example of Google Trends in action:
After Conn’s released its earnings, the stock fell by roughly two fifths from $35.09 to $20.83. The market was presumably spooked because credit losses were fairly high relative to expectations. While management has previously stated that the aspirational goal for static loss rates was 8%, it looks like Conn’s may exceed that for 2013 and 2014 vintage originations. Refer to the static loss tables in the 10-Q (page 32) and make your own extrapolations.
Conn’s originations seem to exceed the amount of money lent to its customers.
In FY2014, Conn’s originations were $1,075M.
It provided $757.2M in in-house financing, including down payments and excluding insurance.
The ratio between originations versus in-house financing was ~142%.
(This is not a short writeup where I say what I truly think. I don’t like doing such writeups because I don’t want to get sued.)
In a nutshell, I think that it is worth taking a deep dive into Conn’s lending practices. In my opinion, the 10-Ks and 10-Qs seem to ignore some important ‘nuances’ of Conn’s lending practices.