At the end of October, I started a theoretical short portfolio as a way to show which names I feel will perform the worst going forward. I had one formal update last month, and here's how things stood at that point in time.
|National Bank of Greece (NBG)*||50,000||$2.45||$122,475|
|Suntech Power (STP)||44,500||$2.34||$104,130|
|Green Mountain Coffee (GMCR)||2,800||$51.69||$144,732|
Now, I've maintained most of these holdings without any changes recently, but I did recently make one swap to reduce my exposure to Orbitz, which unfortunately had grown rather large thanks to its constant rallying. As I posted in my Instablog, here were the changed I made on December 14th:
- Covered 22,000 shares of Orbitz, taking a loss of $20,273.
- Shorted additional 45,500 shares of National Bank of Greece for a total position of 95,500 shares.
- Realized losses after these moves: $23,947
Now since my last update, six of the seven holdings have gone done, good for me. Orbitz has continued higher, but I think it will fall back down eventually.
So today I'm deciding to make another change. I'm deciding to take a nice profit on Amazon. I have made nice gains on the stock and I feel that at this point, there is more room for upside than downside. Amazon's Kindle Fire has done extremely well, even starting to take away some market share from Apple's (AAPL) iPad. Now we all know that the two are not completely similar products, but I'm expecting a strong holiday season from Amazon. Recent good news out of delivery company FedEx (FDX) has only brightened my mood. I think both Amazon and Apple can have great holiday seasons. Two things I want to point out. One, Apple usually has a pre-earnings rally, and I think it will drag Amazon up with it. Second, Amazon is trading at about 1.6 or so times expected sales this year, and that's well below the average of 1.87 it traded at from 2004 to 2010. Amazon doesn't trade off of earnings, so I'm really not concerned with the high P/E at the moment.
To make up for Amazon's exit, I will add a new short position in Research in Motion (RIMM). The company recently reported a terrible earnings report, prompting me to write about Research in Backward Motion. On Wednesday, the stock rallied hard amidst a series of analysts upgrades and buyout rumors. There have been multiple rumors out that RIMM has squashed potential takeover attempts from the likes of Amazon, Apple, and Nokia (NOK). I think at this point takeover attempts are useless, as the large size of RIMM would make a buyout rather cumbersome for the acquirer. If RIMM does not turn things around, I think it could eventually be taken out, but I don't see that happening anytime soon. I'll take Wednesday's jump as a way to get in, and will try to ride this position down to $10.
So here are the moves that will be made in the portfolio. In addition to the Amazon cover and Research in Motion short, I will also be shorting more Netflix and covering a small portion of National Bank of Greece. The last two moves are to reset the portfolio to roughly the $1,000,000 start balance that it resets to each time a move is made.
- Covering 700 of Amazon.
- Shorting 10,000 of Research in Motion.
- Shorting 500 of Netflix.
- Covering 500 of National Bank of Greece.
Overall, the portfolio has $6,132 in realized gains, and $64,445 in unrealized gains for a total gain of $70,577. That is a 7.6% since the start of this portfolio, which is more than double the S&P 500's loss of 3.22%. It is doing well, but I don't like the fact that Orbitz has nearly doubled since the start. I'm hoping that position comes back down. The next move I will most likely make is to cover Green Mountain in the low $40s if it reaches those levels.
I will update you again on my next moves, but remember, this is a theoretical portfolio. It does not take into account costs of transactions or costs to borrow shares. Remember that shorting stocks is very risky, and is not right for all investors. I will leave you with the current portfolio's holdings.
|Research in Motion||10,000||$13.78||$137,800|
|National Bank of Greece||95,000||$2.00||$190,000|
|Green Mountain Coffee||2,800||$45.30||$126,840|
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.