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Time Warner Cable, an interesting CAPS short

Recs

7

February 22, 2009 – Comments (0)

This week's Barron's column by Michael Santoli contained an interesting short idea that I am going to try out in CAPS.  He suggested that the price of Time Warner Cable (TWC) is likely to drop in the coming weeks as Time Warner Cable (TWX) completes the spin-off it the 85% (a whopping 900 million shares) of it that it still owns.  Index funds that have no use for TWC and institutional investors, of whom only 30% of those who own TWX own TWC, are likely to unload the new Cable shares that they receive in the transaction.

If I was going to do this trade in real life, I wouldprobably make it a pairs trade with a TWX long and a TWC short, but since batting.500 would actually hurt my CAPS score, I'm going with a straight short of TWC.

Deej

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