Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Microcap & Penny Stocks : DGIV-A-HOLICS...FAMILY CHIT CHAT ONLY!! -- Ignore unavailable to you. Want to Upgrade?

To: Jetter who wrote (14801)	6/22/1998 1:39:00 PM
From: Secret_Agent_Man	Read Replies (1) \| Respond to of 50264

FACTThis is from The Stock Detective's "How To Short" (with my CAP emphasis): ----------- "A successful short seller combines a sober eye for FUNDAMENTAL VALUE with aggressive market timing instincts. An investor who sells short needs an ANALYTICAL understanding of how to VALUE a COMPANY's BUSINESS in order to identify overpriced stocks. A short seller also needs to seize the opportunity when the price dynamics signal a selling opportunity. A successful short seller combines the traits of a long-term investor with a short-term speculator by using his or her skills and understanding of financial statement analysis, industry knowledge, financial projections, money-management, price trend recognition, risk-reward analysis and emotional discipline to identify and profit from short selling opportunities. (...) How do we solve the price change dilemma? A short seller has to find stocks that buyers are willing to pay a high price for now, but will not be willing to pay a high price for in the future. Additionally, the short seller must understand why buyers are paying a high price for the target stock. If the short seller thinks that these reasons will disappear in the future, then the short seller has found a short sale candidate. The Triggering Event and the Reevaluation As discussed above, a stock is worth what the market will pay for it. For a short sale to be successful, the overvaluation of the stock has to be temporary. The market must reevaluate what it will pay for a stock and decide that it will pay significantly less than it paid before. An event (or series of events) is needed to trigger the reevaluation. The specific event depends upon the story the market told to justify the original high stock price. If the story is that the target stock's earnings are growing at 50% a year, then the trigger could be a poor earnings report. If the story is that the target company has a unique wonder product then a competitor's introduction of a similar, lower-priced product would make the target company less attractive. If the target company is mainly attractive because of its dividend yield, then a sustained increase in bond yields could make the target company relatively less valuable. A short seller should identify a trigger event for the target stock. When this trigger event occurs, in the short seller's judgment, the market will reevaluate downward the prospects for the stock and the price will fall. It is more risky to sell short a stock when you cannot identify a triggering event and when you think it will occur. Without a reason for the market to rethink its optimism toward the stock, its price can stay high and keep going higher." r1