I have short positions open in CNQ, CAR, HTZ, and GM.
music selection: “Save Tonight” — Eagle-Eye Cherry
weigh-in: 211.2 (0.2)
I have four short positions open to hopefully profit off troubled stocks while providing a small amount of hedging. Those positions are mixed bag and I’m going to review them all here.
Canadian Natural Resources (CNQ) is a tar sands producer in Canada. They are struggling to bring new production online on schedule and under budget. This is a high cost producer of low quality crude and I think it can’t long compete with Eagle Ford and Permian shale oil. Unfortunately, the stock has rallied recently (after being a strong winner for me) and is an underwater play. This is a synthetic short (naked call/long put) at the 30 strike and 19JAN2018 expiry. My unrealized P&L is a 238 dollar loss.
Avis Rent A Car (CAR) is a small winner for me. I am betting against this one (and Hertz, half positions each) because I think there is a bubble in subprime auto lending. This ultimately means depressed prices for used cars which will be very damaging to the rental car business economics. I’m up 27 dollars here.
Hertz (HTZ) is doing much better for me and is my best short. It faces the same headwinds as CAR but it seeing more heat in the market. I am up 40% or so. That’s an unrealized profit of 1,008.
Finally, I am short General Motors (GM). I was doing pretty well here but the company wisely unloaded its struggling European business to a competitor. This will improve margins and provides much needed cash. I still think sales will take a hit when the sub prime auto lending bubble pops. It is also evident this company is being run by and for the autoworkers union. If I can stay in the position long enough, it should be a big winner. So far, I am down 820 including payments made in lieu of dividends.
Altogether, I’m down 23 dollars on these four combined short positions. I feel like I am getting hedging at a fair price considering the market has been mostly up since the election. I will continue to look for more attractive short opportunities.
Devour your prey raptors!