Technical Analysis

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  • 1.  Are there better circuits to short?

    Posted 02-14-2025 16:25

    I want to try to short stocks which are overvalued. Whatever I identify is not available for shorting in my brokerage account. Is there a brokerage better for shorting?



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    wish i can post anonymously
    (sing it like, wish you were here by pink floyd)
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  • 2.  RE: Are there better circuits to short?

    Posted 02-14-2025 19:57

    Shorting a stock exposes you to unlimited downside risk.  If you have identified a stock that you think is overvalued, I suggest you consider buying a put option, which limits the amount of money that you can use. 

     

    Given that the purpose of this group is to share best practices and learn from each other, please consider sharing the process you use to identify overvalued stocks, and your rationale for picking the ones you think are overvalued.

     




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  • 3.  RE: Are there better circuits to short?

    Posted 02-14-2025 21:15

    hi sandy - i think, i am aware of the risks. i am not going to speculate on the TSLAs or AXONs to get tasered. my idea is to buy some protection. till recently interest rate did not matter, now it does. i will be looking for high debt, high value unprofitable companies. my idea is to be as transparent as i can. i believe, by sharing i can only benefit. investment knowledge seem to benefit the giver and taker. may be i am too naive. thanks for suggesting put option. but they seem to be too pricey to be practical  



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    wish i can post anonymously
    (sing it like, wish you were here by pink floyd)
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    Original Message


  • 4.  RE: Are there better circuits to short?

    Posted 02-16-2025 12:00
    Edited by BARRY JOHNSON 02-23-2025 11:16

    Are there better circuits to short?

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    You bet. 

    The principle behind ALL factor investing --

    size/small caps, value/low P/E, quality/good fundamentals, growth, or momentum --

    is to go LONG (buy) stocks that score higher on the factor of choice and 

    go SHORT (not buy) stocks that score lower on the factor of choice.

    Example: By/hold SIZE/VALUE factors = Buy/hold Value small caps/Don't buy overvalued large caps = Buy/hold low P/E/ Don't buy high P/E.

    The secret sauce in all 36 AAII guru screens and 19 factor screens (and every academic/professional research project on factor investing since Benjamin Graham's "Intelligent Investor" (1949) is to 

    (1) Identify the factors of interest -

    SIZE (small caps with assets > costs = potential to grow in price). 

    VALUE (assets "values" growing > price/cost to buy = potential to grow in price), 

    QUALITY (revenues > costs = good company = potential to grow in price).

    GROWTH (cash flow/cost ratios = growing revenues = growing assets = growing value = potential to grow in price). 

    MOMENTUIM (relative price strength, "going up" = potential to grow in price).

    Key linkages:  Size --> Value --> Quality --> Growth --> Momentum --> increasing Price --> increasing Returns = WEALTH.    

    (2) Use AAAII guru/factor screens to define the opportunity set -- companies sharing a specific factor.

    (3) Sort prospects low or high/high to low on the factor of interest, and 

    (4) BUY/ go long on the set of the "high" factor stocks that pass the screen.

    (5) Don't buy/go short companies that are don't pass in the rest of the market --> increase odds of higher market returns.

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    BARRY JOHNSON
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    Original Message


  • 5.  RE: Are there better circuits to short?

    Posted 02-16-2025 18:58

    Thank you for your follow-up, Barry, which reminds me of the line from "The Karate Kid" that "when the student is ready the teacher will appear".




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