Some Thoughts on Shorting
I've been writing a fair amount about short-selling lately, as have a number of other Fool writers. Here are a few of my most recent articles on the topic:
- You Won't Make Friends by Shorting Stocks
- Will You Profit From the Next Subprime Meltdown
- Is Shorting Stocks Foolish?
- Beware of These 5 Dangerous Stocks
A few (or maybe more than a few) readers have caught on to the not-so-hidden fact that the stream of short-related articles on Fool.com has coincided with the launch of a new short-focused newsletter.
Now don't get me wrong, I totally understand the cynicism. The Fool, a bastion of long-term investing is suddenly touting short-selling. Sounds fishy. I actually addressed this in "Is Shorting Stocks Foolish." But even past that, there's the potential question of whether I'm actually interested in shorting or whether I'm just writing about it because of the product launch.
Here I figured I had a more informal venue to muse about why I (and that's just me as distinguished from any other Fool writers that have been writing about short-selling, whom I can't speak for) have been writing about shorting.
Basically, I heard the rumblings that we were going to have a short-focused product and I saw the articles that were starting to come out talking about shorting. I wasn't really taken with the whole deal -- after all, I generally focus on high-quality buy-and-hold dividend investments.
But I thought about it, I talked to some of the people working on the product and I came around to the idea. Not that I'm bearish. Not that I want my whole portfolio to be shorts. And certainly not that I'm going to abandon my core investments.
What I liked was the idea of setting aside part of my portfolio for shorts, giving myself a different type of exposure. Plus, I love the idea of being skeptical and digging up companies that are ill-managed or less-than-above-the-board.
I hardly think shorting is for everyone and, in fact, I think that I'd probably want to spend significantly more time digging into a short than I would for a long investment. So whereas long investing requires a significant time investment, shorting increases that.
The bottom line, though, is that I wanted to clarify that I'm not writing about shorting because anyone has said "Fool.com writers need to write about shorting" or "your job right now is to write about shorting." After sniffing around, I liked the idea, so I decided to write some articles about it. Hopefully some readers were able to get something out of those articles -- after all, even if you have no interest in shorting, I think it could be very beneficial to look at your long holdings from the eyes of a potential short seller.
Now, I'd love to hear your thoughts...