While Cohodes only manages his family's account at this time, he was praised as "the highest-profile short-seller on Wall Street" by the New York Times back in 2001. He's also one of the most rambunctious, having famously sparred with companies like Lehman Brothers, Overstock.com, Krispy Kreme, Adobe Systems, and Lernout & Hauspie, becoming well-known for his unusually blunt speech and theatrical antics that include throwing a penalty flag at an executive who refused to take his question.
Just by chance I was looking through "Eye on Shorts" in the G&M before coming over to FWF. I've never shorted a stock either, and I was surprised at some of the names on the list. Many are top blue chip stocks that are core in my portfolio and whose P/Es don't seem excessively high to me. I don't know anything about evaluating shorts either.
Americans have been shorting Canadian banks now for years. Either they've lost a lot of money or the shorts are a hedge on something else.
I made enough mistakes in my early investing days without shorting, so I've never had the urge.
"Why do I have to go to school? If I watch YouTube I'll know everything."
- Grandson #2
There can by many reasons to short a stock and not all of them are because you think the price will drop. Many banks, insurance co's, and hedge funds short stock to hedge their positions. This often has nothing to do with expected price drops. Some of the best performing stock have the largest short positions over many years. That's why I generally ignore the short reports.
I'm not really sure I understand hedging either. I can see that if you want to preserve capital you can go long on a sector and short the same sector, so that the gains are balanced by the losses and the net effect is zero, ie stability.
But what about Hedge companies? Their purpose is to make money, not just preserve it. How is hedging supposed to work for these companies? Or do they just hedge on currency risks?
"Why do I have to go to school? If I watch YouTube I'll know everything."
- Grandson #2
Wallace wrote:I'm not really sure I understand hedging either. I can see that if you want to preserve capital you can go long on a sector and short the same sector, so that the gains are balanced by the losses and the net effect is zero, ie stability.
But what about Hedge companies? Their purpose is to make money, not just preserve it. How is hedging supposed to work for these companies? Or do they just hedge on currency risks?
Their strategies can be very complicated and they guard them jealously. Quite often they will go long one name in a sector and go short a different name. Hoping for a small relative movement. To call this "hedging" is a bit of a stretch. My point was that the absolute short exposures don't mean very much to average investors like you and I.