Monday, July 07, 2008

Stocks I Plan To Short

On June 29, 2008, I posted that I thought it was time to short stocks. Since then, I have been working identify stocks to short. Starting with 100 possible candidates, I have come up with a very short list (no pun intended) of three stocks I plan to sell short.

These are the stocks I have identifed to short:
  • Las Vegas Sands (LVS) - This is a casino stock with properties in Nevada, Pennsylvania, Singapore and Macau. The stock closed at $39.30 today, down from a 52 week high of $148.76.

    $4 gasoline, expensive airfares and the horrible housing market are all hurting the casino/resort businesses. While all casino companies are at risk in this economic downturn, this company appears to be the most vulnerable of the casino companies.

  • Sears Holdings (SHLD) - This is a retail stock, consisting primarily of Sears and KMart, and has successful hedge fund manager Eddie Lambert as Chairman of the Board. The stock closed today at $74.01 after setting a new 52 week low at $71.35. Its 52 week high is $174.05.

    The current retail environment is a tough one, and probably favors companies like Wal*Mart that rigorously manage costs and have superior competitive advantages. I expect the the weakest retailers tend to fail in an economic downturn. Sears and KMart are still pretty low on my list of places to shop.

  • Life Time Fitness (LTM) - This a family entertainment/fitness stock. My spouse's friends all love the facility. Its low membership costs and all inclusive price has something for everyone in the family. It has a full range of fitness equipment, swimming pool, basket ball courts, racquet ball courts, climbing wall, fitness classes and even short term child care.

    I visited a facility and was impressed with the offering, but not enough to shell out a special discounted membership cost of $19 and the subsequent $166 per month. I expect that many others will come to the same conclusion as the economy worsens.

  • So far, these are the only three stocks that I've identified for shorting. For reference, I try to find stocks in a confirmed down trend and still have potential to fall significantly. Thus, I avoid rising stocks due to fall (e.g. energy and commodities) and stocks below $15.

    While I thought I would find a lot of opportunities, many potential candidates were in were already significantly beaten down. Housing, financial, retail, and auto sectors had a number of candidates that didn't seem to have much potential to fall further, i.e. already close to or below $15. In addition, I am currently avoiding stocks which pay a dividend.

    Today, I sold short 100 shares of Las Vegas Sands at $38.10. Interestingly, I also tried to sell short Sears Holdings at $72.09, but was unable due to shares "not being available to sell short." Afterwards, Sears fell to $71.35 before recovering and closing at $74.01. Lucky me :-) I have not yet tried to establish a short position for Life Time Fitness.

    Disclosure: At time of publication, I am short Las Vegas Sand in my trading account. The account managed by our financial advisor is long Sears Holdings.

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    This is not financial or stock investment advice. Please consult a professional advisor.

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