Shorting Stocks
Let me be crystal clear: I’m not a money manager. I’m not a particularly astute investor. And even I wouldn’t follow my own advice. In fact, my go-to-line for advice has always been to try shorting stocks I buy. So you’ve been warned.
But today I think there’s a simple way to look for opportunity in the market. Simply watch for marketing trends that inflate big stock values and then come crashing down when the companies can’t handle the hype. The opportunity is in shorting stocks of media darlings.
Examples that have already happened? Chipotle and Tesla. An opportunity that’s ripe for exploitation right now? Keep reading.
Thanks to their inability to manage their food borne illness image crises, Chipotle’s March 7th high of $533 tumbled to $390 on July 7th. Even if you didn’t short at the maximum and sell at the minimum, there was still lots of time to exploit the stock’s volatility. Melissa Francis and I talked about Chipotle’s problems on FOX Business on December 11 and again on June 10.
Or how about Tesla? In July of 2015 their stock was valued at $282. One year later, it’s down to $224 and was as low as $143 in February. Why? Because in addition to the typical problems that plague tech startups, the word on TV screens and smartphones around the country is that Tesla’s auto-pilot software is killing people. Whether or not the car’s self-driving modes are ready for prime time is beside the point. The public believes that Tesla has a problem and their stock reflected that opinion. And all this after almost 400,000 would-be buyers plunked down deposits for Tesla’s model 3.
But so what? These potential windfalls have already happened. What you want to know is where is the great opportunity on the horizon for an astute investor like you? Easy. They are hidden in plain sight in today’s headlines.
Guess what game just made its namesake $45 million on $160+ million in revenue? It was the Kim Kardashian: Hollywood app and it was downloaded over 45 million times. Forget Bitcoin, gaming is today’s new currency.
So is the Keeping Up with the Kardashians‘ star, number 42 on Forbes‘ Celebrity 100 list, the next big opportunity?
No, it’s not Kimmie. Today’s prospect is a fat little yellow creature and its friends. Pokémon Go, the mobile app version of the 1990’s card trading craze is the next big chance to score. Three days after its release the game been downloaded from Google Play and the iOS App Store about 7.5 million times and that number continues to increase. But more stunning is the company’s shareholder value which has already increased over $9 billion. Not bad for a few day’s work.
Where’s the opportunity then? Not simply because what goes up must come down but because people are going to be dying to play Pokémon Go.
Dying. Literally.
From The New York Post: “Mike Schultz, a 21-year-old communications graduate on Long Island… took a spill on his skateboard as he stared at his phone while cruising for critters early Thursday.”
From The New York Daily News: “The MTA tweeted a warning for players not to follow creatures off train platforms. In Missouri, police said they arrested four teens after they allegedly lured victims to remote locations using the game and robbed them.”
From The Wall Street Journal: “Dakota Schwartz…sprained his ankle at a park trying to capture a particular Pokémon.”
Sure, these injuries are minor but it’s just a matter of time before something catastrophic happens. Players will walk into traffic, walk in front of speeding trains, walk off of rooftops and worse. And just like the people who were Dying to be in Facebook people will be dying to play Pokémon Go. Once the liability suits start pouring in you’ll be able to fan yourself with the gauge that records the dropping price of the company’s inflated stock.
As I said in the beginning of this post, I know next to nothing about buying stocks, shorting stocks, investing or speculation strategy. And until now, shorting stocks has always been something worth doing against my recommendations. But what I do know how to do is build brand value. And I also know when that value is about to come crashing down.