Very well-reasoned and persuasive post.
The only thing that has prevented me from shorting AOL (aside from the fact that I have never shorted any stock) is that everything about AOL has been so counter intuitive. It should stressed that the bulls were wrong all along about AOL's profitability.
As for Cramer, I too did the freebie and you're correct, he reserve's shorting to very rare instances indeed:
"that unless you actually had an edge, you knew something about X's competitors
that X didn't know, price cuts, inventory bloat, whatever -- or you knew that
X's products cause brain damage -- the short would kill you before it would make you
a dime. Shorting on a price basis is the quickest way to the poorhouse."
What's different now:
Most of the analysts recommending AOL do so because of its alleged brand equity, citing Coke or even Disney. The problem is that the analysts have missed the fact that a major component of any brand equity is consumer loyalty and satisfaction. AOL scores very low on both, demonstrably below its competition. AOL has seemingly flourished because for many, if not most, it appeared to be the only game in town. However, there is now proof that that has changed, i.e., the survey that I cited. (It might help that that survey was on the interactive WSJ's front page, which often parallels the print version).
Hopefully that "new" reality may assist the reversal of AOL's ridiculous stock valuation.
Regards |
