Shorting ... Watch the Earnings drop !
Don England wrote -
<if amat has a p/e of 17 and has been trading in a range of 40-50, more or less, for 2 months, and now sits in the middle of that range, is this really a low risk bet? >
Maybe, maybe not. The view is that the "E" Earnings, drops by say, 75%. Then the new P/E would be
about 68. IF the P/E stays up at say 35, that means the stock drops about 50%. Add in a little overshoot
and you got a nice short play...
Problem is that AMAT is a pretty good, well run company (as well a it can be, semi equipment is a tough business). KLAC is pretty good to. What makes a better short is a non-leadership company (maybe Novellus), or one where their market space gets crowded (like Inktomi INTK with competion from Google & Akami).
If you have dumb/weird/flaky management, that's even better. (Oracle without Ray Lane)
I made good money shorting INTK, which had a P/E of about 140 at the time.
I shorted both Ariba (ARBA) and Commerce One (CMRC) in late April.
Ariba is #1 in this space, Commerce One is #2.
Both have pretty good management, but Ariba got traction much earlier with a simpler biz model.
I made good money shorting Commerce One.
I broke even / gave some back shorting Ariba.
Picking stocks for shorting is tough - you need to to the opposite of almost every for longs.
Seems to require a lot of mental flexibility.
I now tend to buy puts on stocks or indexes - limits my risk.
Best of Luck. |
