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Update Short Positions

Topping up the shorts today.

music selection:  “Bullet The Blue Sky” — U2

weigh-in:  213.6 (1.4) – three consecutive weeks of progress!

I have four short positions open and three of them are in the green.  The market is a little frothy so I’ll try to add more short positions as time goes on to increase my hedging.  High on the list for  a new short is Ford (F).

Canadian Natural Resources (CNQ) is a Canadian oil sands producer of bitumen.  They have been having execution issues with developing their mine including multiple cost overruns and downward revisions in the estimate of available barrels.  They also are a high cost producer of a low economic value form of crude that sells at a discount to WTI.  I expect them to struggle mightily over the long term so long as WTI stays priced below 55 a barrel.  I put on a synthetic short on 9NOV2016 of 2 contracts at the 30 dollar strike.  As of Friday’s close, the position is 6 dollars in the green.

Avis Rent A Car (CAR) is another short position.  I have three short positions open on the theme of a bubble in sub prime auto lending.  Fitch reports that auto loans in default are on the rise.  This ultimately leads to depressed used car prices hurting rental companies and automakers.  The CAR short was opened on 10OCT2016 and topped up on 23MAR2017.  The two positions together are 270 dollars in the green.

Hertz (HTZ) is the second of my rental car positions.  Each of these is half a position of 2,500 dollars at risk each.  I opened the position of 10OCT2016 same as CAR.  Also like CAR, I topped up the position on 23MAR2017 after price declines significantly reduced my capital at risk.  I topped up AGAIN this morning selling 31 shares short at 14.54 a share.  This one has been my best performing short and is 1,714 in the green.

Finally, I have a full position short in General Motors (GM).  GM has been the biggest offender when it comes to loaning money to people who can’t pay it back to buy cars.  I may join them soon with Ford.  I originally shorted 155 shares at 32.32 each on 10OCT2016.  The position is currently in the red by 342 including payments I had to make in lieu of dividends to the original share holders.

Overall, my short positions are in the green by a combined 1,648.  They also provide 12,096 in leverage for my portfolio while acting as a hedge in a general downtown in prices.

Devour your prey raptors!

{ 5 comments… add one }
  • DivHut May 8, 2017, 5:10 pm

    You don’t really read about short positions among our investing peers. First it was dividends only, then options and now shorts. It’s awesome you are capitalizing on stocks going up, down and even sideways. Looks like your shorts are falling as predicted. Thanks for sharing.

    • The Lizard King May 8, 2017, 5:46 pm

      I think I have the only foray into deeply discounted high yield bonds as an investment too. Ahead of the curve – Devouring my prey!

      • financialfreedomsloth May 8, 2017, 6:20 pm

        I think you are indeed the only one! It just goes to show that there is always a profit to be found somewhere if you know what you are doing

  • Spanish Raptor May 10, 2017, 3:27 pm

    Hello,

    which are the fundamentals you use to choose a short position? Net income, cash flow, P/E ratio, debt/equity ratio…? Or do you wait until a big share boom and then short?

    Regards from Spain.

    • The Lizard King May 10, 2017, 7:25 pm

      Spanish Raptor,

      I don’t use financial metrics to determine a short. Just because a stock is richly value doesn’t mean it will fall. It can in fact get even more expensive. I look for a catalyst that will lead to falling prices. With CAR, HTZ, GM, it is rolling over of subprime auto loan debt suppressing used car prices. CAR and HTZ will not be able to refresh inventory without taking huge losses and GM will see slowing sales as used cars become a better alternative.

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