Shorts

I strongly recommend NOT shorting common stocks.  That is a game for the well-connected in the canyons of Wall Street.  Rather, if one is convinced about the poor prospects for a company, buy “puts” on its stock.  The only problem here is that the longer-out are the terms for such puts  … the more expensive they become.  So benefiting from the poor outlook for a company becomes a very tricky game of timing.  However, there are some stocks that I am convinced whose longer-term prospects are quite dim and would short them if I had unlimited risk capital and unlimited time.

They are:

Amazon – With a capitalization of $133.1 billion, Amazon is deemed to be worth more than FedEx plus United Parcel or the combination of both General Motors and Ford.  The bald-headed Jeff Bezos has mesmerized Wall Street investors for over fifteen years even though he has yet to bring any significant profits to the bottom line of this Internet giant. He has done this with a stream-lined order-processing and shipping operation which is the envy of most. However, he has also benefited greatly from the lax sales-tax rules in the many states in which he has no bricks-and-mortar operations.  This advantage is disappearing with recent legislative proposals … and so will some of the panache that this company has enjoyed.  To counter this revenue and profit impact, Amazon has instituted a $79 annual membership fee in exchange for free shipping and some other media perks.  My wife refuses to participate in this semi-scam and so, to follow Peter Lynch’s advice, listen carefully to your wife when making investment decisions.

Also Bezos’s personal purchase of the Washington Post for $250 million suggests to me that he is losing his mojo.  Such a sidebar is bound to reduce his focus on improving Amazon’s prospects ... and so, I suspect that the apogee of this company has indeed occurred.  But be careful … it may take some time for investors to realize this.

Afterward: See: Wall Street Journal Article

Tesla. – With a capitalization of $16.9 billion, Tesla, as a company, is worth more than Harley Davidson or the combination of both Jetblue and Southwest Airlines.  CEO, Elon Musk has done a crackerjack job of creating a great-looking and well-engineered all-electric auto … which was named 2013’s Car of the Year by Motor Trend magazine. As such, he has captured the imagination of wealthy greenies who are looking for eco-bragging rights. However excellent this auto is, it still suffers from a driver’s anxiety about running out of power … say in the middle of the Holland Tunnel.  Supposedly this car has a range, when fully recharged, of 250 miles, but speed, ambient temperature, traffic density, and darkness can adversely affect this number.  And, if a recharging station is not handy, things can get quite dicey.  Even, if such a station is available, waiting up to an hour for some more electrons to get one to one’s destination might be a real downer.  I suspect getting around these engineering and physics limitations will eventually become a serious gating factor for this company’s longer-term outlook.

Also, I think Elon Musk’s recent touting of the pie-in-the-sky Hyperloop technology is an unnecessary distraction for this visionary … see: Spacex Story.

Afterward: See: CNBC Story and for another option in a fancy golf carts see: BMW i3.

Facebook   -- currently enjoys an unrealistic market valuation of $89.3 billion (in my opinion) … more than three times the market value of the CBS television network (another big advertising platform).  This is marginally near the value Facebook was awarded at its initial public offering last fall ($104.2 billion).  This is because investors now believe that the company may have solved the problem of monetizing its huge installed user base (possible close to a billion users)… particularly on cell phones.  This may or may not be the case but there is no question that the user-hype surrounding social networking is the reason for the high price on this stock … more than doubled from its low of $17.55 last fall to $36.88 currently.  One can reasonably assume that the analytic sophistication of this type of investor lemming is not the greatest.

Facebook founder and CEO, Mark Zuckerberg, has recently been immersing himself in the immigration reform brouhaha … see: Daily Mail Story.  This, to me, can be nothing but a distraction for this 29-year old entrepreneur ... and I doubt that too many of Facebook's H1B visa recipients are coming from Mexico.  I am also sure that the challenges facing Facebook’s establishing the kind of revenue and profitability that would justify its current market value will be huge and not-easily solved.  The smirking Zuckerberg might well be advised to give these challenges his full-time attention.