01 26 14 Thoughts - Shorting
I can't stop thinking about shorting stocks. For one, I believe the market is overvalued so if you short now, you have a tail wind with you. That said, not may in the motley fool recommend shorting. There are a lot of risks to shorting. Your losses aren't capped like in going long. The most you can lose in going long is your initial investment. If the short triples, you lose much more than your initial investment. I think of Akman and his herbal life short, Greenlight Capital's David Einhorn shorting Chipotle, and even me thinking of shorting Best Buy. I don't know much about herbal life, but I do know that Chipotle has a possibility of going up several fold, so betting against it is much more dangerous than say betting against JC Penny's. Chipoltle has the possibility (is going to) of opening a ton of new stores, but in addition has the Chop House, and new Pizza concepts that could bear fruit. That sounds like a terrible short. JC Penny's sounds like a good short because it's not only not opening stores but is closing them, it also has the headwind of retail sales going online. I look at Radio Shack the same way. Boy would I love to short it. It has the headwind of retail sales going online and even more so because everything they carry is a commodity. JC Penny's at least has clothing which a lot of people including myself like to go to a store to try on. Radio Shack also has a lot of locations in malls that are slowly losing more and more traffic. I suspect many malls are going to start closing around the country in the coming years.