Katie: "Several people have asked, but I didn't think many would short a stock for an entire year. What do you think?"
Actually, the opposite is true. Some of my longest held positions are stocks that I shorted and they went to zero, or the permanently under the nickel range that amounts to the same thing. This is the ideal short, known as a "terminal" short, because as it goes down you put the proceeds of your short sale in your pocket, but because you have not yet covered the short, you don't owe any taxes on the gain. I am still short some things from the 1983 speculative flurry that at this point it is safe to say I will probably never cover.
The market today is jam packed with stocks that will make excellent terminal shorts. For example, there are quite a few internet companies that are losing money now and will most likely always lose money. Should a bear market come along and investors lose their taste for financing infinite losses, these things will go to zero. And the OTC BB is loaded with crummy companies with no real technology, no money, no prospects, but have been pumped onto the most gullible because, let's face it, there are quite a few dimwits with money out there these days. I recognized their names in some of the long picks on this thread. Many of them will go to zero eventually too.
The point is that an investor with patience can short a wildly overpriced stock and eventually make a lot of money, just as the patient buyer of an undervalued company will do well.
As to whether you want to include them in your contest, that is up to you. You have taken on a lot of work as is, and if I were you I wouldn't want to add to it. Plus you get into complications in terms of calculating the return on a short, because in a sense one doesn't invest any money at all when one goes short, assuming there are ample marginable assets in the account. Rather than investing cash, you are accepting theoretically unlimited risk. So let's say you short a stock at $20 and it goes to $15, yes its price changed 25%, but you made an infinite percent on your investment since there was no investment. For contest purposes, counting that as 25% understates the real return. Whatever you decide, thanks for your considering this. |
