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Strategies & Market Trends : Roger's 1997 Short Picks -- Ignore unavailable to you. Want to Upgrade?

To: vegetarian who wrote (7904)	12/6/1997 10:06:00 AM
From: Pancho Villa	Read Replies (1) \| Respond to of 9285

MC: >>The best ones are where TA supports FA (like GTW now, yee haw! I shorted it on every bounce and predictably made money).<< Yes GTW has been a generous stock to me, trading on the long side. last time I got out was selling the long at 43! Never made a lossing trade on this puppy! Haven't looked into playing the short side of GTW but IMO the box makers are shortable. CPQ, I expeculate, may be a better candidate. Need to look into it but the sub-1000 PC is going to affect their bottom line in more than one way: 1. Lower margins/revenues than for a more upscale product mix, and 2.also (this one is more subtle) a very smart analyst says their cost system does not assign the overhead costs correctly for the cheap boxes [this is because they assign overhead (indirect) costs based on direct material and labor costs so the expensive boxes absorb a higher share of the overhead costs. The assigment of overhead should be based on units not dollars as this is what physically generates overhead . This has to do with activity based cost accounting. A topic that started to be hot in accounting abuot 10 years ago but Co's are still catching up with it.] The bottom line on CPQ is that they are missing the boat on calculating the cost of the cheap boxes. These are more expensive than they think they are! I know all this "second hand" from the analyst who made this comment in Barron's a few weeks ago. Notice that GTW came down quite a bit from its highs, but perhaps not enough. The only concern I would have about shorting CPQ DELL GTW now is that these guys may all have and excellent fourth quarter... >>One mistake I did with ASND was that I should have shorted it at 80 again which I did not do, I will try to avoid it this time around.<< Yes, if you belive you have done your homework, one should have the guts to add to the position. Of course their is a prudent limit to what percent of the portfolio a single short position may be. With BFIT I have gone "all the way to my limit" with the BFIT short accounting for about 13% of my net equity portfolio. These days I am: 97% long, 3% cash, and 66% short, for a 31% net long position. IMO, this is a good balance given my risk profile and the current [market]conditions. Will force myself to basically leave thing alone as we greet the new year. I do not know/use TA tools but have shorted "good stocks" that I believe are overpriced like WLA, INTC, NVLS, always making money but covering to soon! I chicken out easily when I short "lions" (and maybe rightly so). IMO one can not expect the same profit potential from a "short term short" as from a "long term short" shorted on the basis of FA. Regards, Pancho