Occasionally, I find myself shorting long ideas that are written up on VIC (ValueInvestorsClub.com). VIC is an exclusive website where a mix of professional money managers and non-Wall Streeters post investment ideas. Non-members like myself can sign up for a guest account and see ideas with a 45-day delay.
Here are situations where I have taken the opposite side of their trades.
Queenston Mining (QMI.TO) – closed at a profit
Sold Queenston Mining at $5.27ish for a nice profit. Osisko announced a takeover of Queenston (0.611 Osisko shares for every Queenston share). I sold because it seemed to me that Queenston was close to fair value. At this point in time, a competing bid seems unlikely to me. One reason is that Osisko’s bid has a non-solicitation clause that Queenston management agreed to. Agnico Eagle Mines, which has a strategic investment in Queenston, will not be bidding on Queenston as it struck a deal with Osisko.
JCP released its earnings for Q3 2012 and they are really bad. Comparable store sales have continued their dramatic decline:
Q1 2012: -18.9%
Q2 2012: -21.7%
Q3 2012: -26.1% Continue reading
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.
