Malcolm Bersohn. Yes, several people here consider a stock's short ratio figures in making their buying decision.
I mostly do not.
I am certainly an easy target when it comes to "homework", shorts or no shorts. People on the thread are pretty kind to me, but it's fairly evident that if I have the number of stocks I say I own or am buying, that I can't possibly be doing in-depth, detailed dd. If the position is new to me (like MNY) and if what I post about it is it, then it's reasonable to assume I haven't studied it long and hard enough or owned it long enough to have much depth in discussing the stock, its business or its prospects.
MNY can drop further, as the shorts are betting. I don't see where it's going out of business though (and of course, I could be very wrong). Looking out 18-24 months, this stock has assets and resources that could (should) enable it to post respectable earnings, given its current (low) price. At last report two value funds were big owners (I assume they still are): Southeastern Asset Management and Third Avenue (Marty Whitman of "safe and cheap".)
Sometimes I have the impression that shorts take on their positions because a particular stock is declining and this fits a macro strategy the shorts believe in. For example, with the two or three subprime lenders I've been buying last week, the short argument is that the balance sheets are so loaded with debt, that if customer defaults increase - and that is a decent likelihood given layoffs or further indications of a slow or declining economy - then equity on the balance sheet will be trashed, earnings will be wiped out, and the stocks will decrease further. These companies all have high short positions and a vocal short community. I see the companies as big and geographically dispersed having stocks at multiyear lows, low p/sales, low price/book, and still earning (assuming accounting is real) profits. Buys for me.
Paul Senior |
