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Update Short Positions (AGAIN)

The shorts have been performing well so I’m topping up again.

music selection:  “What Difference Does It Make?” — The Smiths

Avis Rent A Car (CAR) fell another 3.5% yesterday and it’s time to top up again.  I sold short another 10 shares at 25.28 to bring my exposure back to 2,500.  I’m up 637 dollars so far.

Hertz (HTZ) cratered over 11% yesterday which is what prompted me to go back to the trough this morning.  I sold short another 56 shares at 11.04.  I am up 2,360 in HTZ so far.

I initiated a new short position this morning in Ford Motor Company (F).  I sold short 457 shares at 10.941 for 5,000 worth of exposure.  This play is on the same theme as CAR, HTZ, and GM; the bubble in subprime auto lending has to pop which will deflate used car prices.  GM and Ford will both find themselves with tons of returning leases that are not worth their book value just as new car sales are in cyclical decline.

GM remains 395 dollars in the red. CNQ on the other hand has improved to 8 dollars in the black.  My total return on short positions is 2,608 as of yesterday’s close.  That is on 16,000 worth of exposure since 10OCT2016 or 27.75% annualized.

Some people don’t like to short stocks because they think their upside is limited to 100% as the shares can not fall below zero.  I think it is important to note you can make MORE than 100% on a short if you are diligent about topping up exposure as prices fall.  HTZ is down 70% since I initiated.  But I am up 94.4% on the position thanks to piling on the stock experiences misery.  I think my 27.75% return so far is excellent considering I also get leverage and hedging as a bonus to the positions.

Devour your prey raptors!

{ 4 comments… add one }
  • Duncan May 12, 2017, 3:29 pm

    I’m a little surprised you picked Ford as your next position. They’re generally regarded as one of the more fiscally conservative automotive companies, given that they didn’t have to get bailed out. Have you seen evidence in their reporting that shows they have excessive exposure to the auto loan bubble relative to other companies?

    While I tend not to trust articles enough to act on them, I have seen general sentiment that Ford could actually be undervalued due to being dragged down with the rest of the industry “unfairly”. I’m curious what specifically led you to Ford for this short position.

    • The Lizard King May 12, 2017, 5:07 pm

      Ford is less guilty than GM but still exposed to the problem that there is going to be a huge surplus of used cars on the market when the bubble pops and as leases expire. We are already entering a slowdown in new car sales (it is very cyclical industry). Ford is second biggest US automaker so they are the second target for a short. I’m shying away from foreign companies (used values hold up better) and Fiat Chrysler as they are chomping at the bit for more acquisitions.

  • Chris B May 12, 2017, 9:21 pm

    You’re using synthetic shorts, correct?

    • The Lizard King May 12, 2017, 9:45 pm

      CNQ is synthetic because the borrow rate is very high. GM, F, CAR, HTZ are all normal shorts of the underlying equity.

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