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Strategies & Market Trends : Value Investing

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To: valueminded who wrote (3273)	2/21/1998 9:59:00 AM
From: James Clarke	Read Replies (2) of 78516

A good short doesn't necessarily have to be a high-flyer. As I have found (from being long these stocks at the time) is a stock with collapsing fundamentals, down from 20 to 10. Then short it to 5. Not my instinct, but its not a bad way to go as long as the fundamentals are going from bad to worse. Take Reebok for example. Its industry is in bad shape in the short term at least. Though the stock has hardly been a highflyer, there is no reason why it should be. It has lost 50% of its U.S. market share in the last five years, and that trend is accelerating. Visit their outlet stores - they are almost literally giving product away. A lot of potential customers think their shoes fall apart. And they are at a serious competitive disadvantage to Nike and Adidas. On top of that, they have the worst balance sheet in the industry. The stock has run up with Nike this week on rumors that Buffett is buying Nike. It makes no sense to me why Reebok would go up too. That's what a short looks like.

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