Paul Senior,
Thanks for expressing your differing opinion, and changing and correcting mine.
I should rephrase that sentence to "almost a requisite".
I should also make clear that I meant that kind of tongue-in-cheek too (I exaggerate for effect...)
I've found the best shorting opportunities with specific companies occur AFTER everyone believes it's a crisis. The stock drops, but not far enough, and that still leaves room for further shorting.
I think that this is true: most contrarian shorters will be too early. Even in the case of Burry's short: remember, he thought that he had to be quick about it, or everyone else would catch on, but he was way early, and had to take losses for quite a long time. Most people won't really have confidence in calling the bubble until it's actually bursting or until it already has burst – therefore, you have time. Hence:
A safer bet, imo, than shorting something at what seems to be a peak, but may not be.
That may be true for general market shorts, too (unless their function in your portfolio is that of a hedge), but as you said, even more so for company-specific shorts.
Again, thanks for pointing out the holes in my reasoning. It's just so counter-intuitive for a contrarian to wait until everyone else sees what you see (in my mind, it's the opposite of traditional value investing), but I shall have to try to learn! Patience before you short, not patience for the short to become 'in the money'. |
