Finding Shorts

Finding stocks to sell short is generally regarded as a simple matter.

You just take all the good things a stock could have an reverse the criteria. Anti-stock, like anti-matter in physics.

But a real predator is looking for more.

Strategic Weakness

Because a real predatory short seller is willing to cause damage, instead of waiting for the company to self-destruct, he is looking for one or more strategic weaknesses.

We love company officers with undisclosed criminal records. We love fraudulent disclosure. We can take things like this and publicize them, although it is often difficult to get the attention of over-worked regulators and other governmental authorities.

We love seeing lots of institutional shareholders who can be educated as to the weakness in their holding.

We love seeing companies that need cash eternally and have little in the bank. We can drive the price down, hopefully, and watch them be unable to sell new stock for money.

We love asking pointed questions. We love deep research and investigation.

We are looking for something we can do to make things happen.


Bubbles

 Boy, do we love to see bubbles -- overdone stock promotions, wild public enthusiasms (note that I didn't mention the Facebook or Zynga IPOs here specifically).

When you see, during the Internet boom, two college dropouts going public to raise millions in a raw start up, you know that you are in the tail end of a big bubble. In the oil boom decades ago, it was two geologists with a desk and a telephone going public in a start up oil company.

The only problem you have with a bubble is predicting the top. Bubbles can go up so far they exhaust your capital and your staying power. When is the peak? Experience and judgement are valuable here.


Publicity

A real hungry bear looks for and develops outlets for publicity, not unlike the bulls who are engaging in stock promotion.

Reporters love bad news. They love scandal. We cultivate them by doing their homework for them. We collect documents and lead them in the right direction.