Seeking Alpha's 'Top Short Ideas For 2016': Diamond Resorts Was A Great Pick!

|
Includes: ACH, AER, AGU, ANF, ARES, AYI, AZN, AZO, BHP, BKS, CHDN, CIB, CMG, CPN, CVX, DPS, DPZUF, DRII, EDN, FL, FRP, GDDY, GILD, GME, HBI, HCI, HGRVF, HMY, HTHT, IOSP, K, LBLCF, LUK, LVLT, MAIN, MFRM, NFLX, NGS, NRF, NTRA, NTRI, OAS, OCLR, OCPNY, PBH, PFPT, PRMRF, PRTY, PSMT, RCL, RONAF, ROST, RTMAF, RUN, S, SCTY, SEAS, SJR, STX, TEX, TGI, TSLA, UEC, UPLMQ, VDTH, VTL, WBMD, WFT, WING, WIX, XONE
by: Anthony Cataldo

Summary

For the first time, I entered a Seeking Alpha contest; “Top Short Ideas for 2016,” along with 57 others.

Four contributors selected SolarCity Corporation (7%), 2 selected Aluminum Corporation of China Limited (3%), and 2 selected Tesla Motors, Inc. (3%) as their “Top Short Ideas for 2016”.

33 are in-the-money (57%), 24 are out-of-the-money (41%), and 1 selection is flat (or neither), after the first trading week following the January 31 contest deadline.

6 earlier Seeking Alpha theme-based contests and results are also described, where, in aggregate, 13 were long and 6 were short positions.

Diamond Resorts was a great short pick; the article will be available to non-subscribers of Seeking Alpha PRO on February 19 at 11:43 AM.

Researching and picking a winning stock is wonderful. Identifying those who can do the research and pick them for you may be even better.

I like to examine the performance of others to identify experts - those who can pick winners. While I contribute to Seeking Alpha, seeking comments and guidance and a variety of opinions from others, I also try to "go along for the ride," as I identify those providing great insights into securities with high returns or potential.

This article takes a near-term look at the early returns generated from the most recent Seeking Alpha contest. Six earlier contests are also described.

Some Descriptive Measures on the Most Recent Seeking Alpha Contest

Seeking Alpha runs contests for contributors, from time to time. The most recent contest was the "Best Short Idea for 2016." There were N=58 entries between the January 11 start date and the January 31 deadline. After the first full trading week following the January 31 deadline, Matus Kubala's January 20 Seeking Alpha article On Diamond Resorts International, Inc. (NYSE:DRII) generated a return in excess of 25%. Buying puts would have generated even higher returns. I "missed the boat" on this trade, at least, so far.

Below is a chart of returns after the first full week of post-contest trading. The table from which the chart was developed follows. The vast majority of the picks have done well, so far:

Tabular data, from which the above chart was developed, follows:

Alphabetical By Ticker

Since Published

Sorted by Returns

Since Published

1

(NYSE:ACH)

8.24%

1

-25.31%

2

8.24%

2

(NYSE:PRTY)

-22.51%

3

(NYSE:AGU)

3.38%

3

(NASDAQ:TSLA)

-19.72%

4

(NYSE:ANF)

-4.94%

4

(NASDAQ:MFRM)

-17.40%

5

(NYSE:ARES)

-7.38%

5

(NASDAQ:PFPT)

-17.08%

6

(NYSE:AYI)

-6.18%

6

(NYSE:HBI)

-16.91%

7

(NYSE:AZN)

-5.27%

7

(NYSE:GDDY)

-15.68%

8

(NYSE:AZO)

-4.75%

8

(NYSE:RCL)

-15.10%

9

(NYSE:BHP)

3.91%

9

-13.54%

10

(NYSE:BKS)

-5.82%

10

(NASDAQ:SCTY)

-12.41%

11

(NASDAQ:CHDN)

-5.15%

11

-12.41%

12

(NYSE:CMG)

-3.26%

12

(NASDAQ:WIX)

-11.80%

13

(NYSE:CVX)

-3.54%

13

(NASDAQ:NTRA)

-10.70%

14

(NYSE:DPS)

-6.47%

14

(NASDAQ:NFLX)

-9.51%

15

(OTCPK:DPZUF)

0.00%

15

-7.38%

16

-25.31%

16

(NYSE:S)

-7.17%

17

(NYSE:EDN)

-4.37%

17

(NYSE:UPL)

-6.95%

18

(NYSE:FL)

-4.76%

18

-6.47%

19

(NASDAQ:FRP)

6.52%

19

(NASDAQ:NTRI)

-6.29%

20

-15.68%

20

-6.18%

21

(NYSE:GME)

-3.77%

21

-5.82%

22

-16.91%

22

-5.71%

23

(NYSE:HCI)

1.36%

23

-5.71%

24

(NYSE:HMY)

25.13%

24

-5.27%

25

(NASDAQ:HTHT)

0.11%

25

-5.15%

26

(NASDAQ:IOSP)

1.68%

26

-4.94%

27

(NYSE:K)

52.00%

27

-4.76%

28

(NYSE:MAIN)

0.04%

28

-4.75%

29

-17.40%

29

-4.37%

30

-9.51%

30

-3.77%

31

-10.70%

31

-3.54%

32

-6.29%

32

-3.26%

33

(NYSE:OAS)

29.86%

33

(NASDAQ:WING)

-1.31%

34

(NASDAQ:OCLR)

26.47%

na

0.00%

35

(OTCPK:OCPNY)

3.41%

1

0.04%

36

(NYSE:PBH)

3.09%

2

0.11%

37

-17.08%

3

1.36%

38

(OTCPK:PRMRF)

49.40%

4

1.68%

39

-22.51%

5

(NASDAQ:VTL)

2.01%

40

-15.10%

6

(NYSE:SJR)

2.61%

41

(OTC:RONAF)

103.73%

7

3.09%

42

(NASDAQ:RUN)

7.57%

8

3.38%

43

-5.71%

9

3.41%

44

-5.71%

10

3.91%

45

-12.41%

11

6.52%

46

-12.41%

12

(NASDAQ:WBMD)

7.02%

47

-7.17%

13

7.57%

48

2.61%

14

8.24%

49

(NASDAQ:STX)

10.91%

15

8.24%

50

-13.54%

16

10.91%

51

-19.72%

17

(NYSE:WFT)

12.12%

52

-6.95%

18

(NASDAQ:XONE)

13.77%

53

2.01%

19

25.13%

54

7.02%

20

26.47%

55

12.12%

21

29.86%

56

-1.31%

22

49.40%

57

-11.80%

23

52.00%

58

13.77%

24

103.73%

Equal-Weighted

1.10%

Equal-Weighted

1.10%

Click to enlarge

My Own Pick Was the Most Frequent Pick & Did Well, but Others Did Better - SolarCity

My "Top Short Ideas for 2016" contest submission was SolarCity Corporation. Four of the 58 contestants selected SolarCity. Below is a chart for the SolarCity stock price for the first week of trading, following the end of the contest:

In recent months, [1] the unfavorable 10-Q for the 3rd quarter (October 30, 2015) is likely to have resulted in the decline in the stock price, [2] anticipation of and the extension of the solar investment tax credit on December 18, 2015, perhaps in combination with a short squeeze, resulted in a spike in the stock price, and [3] anticipation of an earnings report on February 9, 2016, with an EPS forecast at $-2.6 is the likely reason for the downward drift in stock price.

The above chart showed a bit of recovery on Friday, February 6, after the executive branch proposed a $10 per barrel of oil tax (i.e., about a 35% increase from current levels in the low $30 range). While not expected to result in the successful passage of legislation, oil and traditional fossil fuels are energy "substitutes" for solar and other green energy alternatives, and any proposal that increases the cost of these traditional energy alternatives will have a positive impact on solar and other non-traditional energy sources. In this case, the proposed increase in the cost of oil is so dramatic that even a tiny probability of legislation passage is likely to have caused a pause in the downward drift in SolarCity's stock price.

Descriptive Data and Results for 6 Prior Seeking Alpha Contests

Below are results, through February 5, 2016, for the 6 prior Seeking Alpha contests, where only 1st, 2nd, 3rd and 4th place winners, if applicable, are provided, along with equal-weighted returns. It assumes that you used these winners to build a separate portfolio from each contest, based on the publication date of the article:

1. Top Idea 2016 Contest

Click to enlarge

Tabular data follows:

Return

Since

Ticker

Published

Position

(NYSE:CPN)

29.75%

Long

(NASDAQ:VDTH)

-24.59%

Long

(NYSE:TEX)

13.86%

Long

Equal-Weighted Return

6.34%

Click to enlarge

2. Retail Contest

Click to enlarge

Tabular data follows:

Return

Since

Ticker

Published

Position

(OTCPK:RTMAF)

-9.43%

Long

(NASDAQ:PSMT)

22.87%

Short

(OTCPK:LBLCF)

11.83%

Short

(NASDAQ:ROST)

-2.74%

Short

Equal-Weighted Return

5.63%

Click to enlarge

3. Mid-Cap Contest

Click to enlarge

Tabular data follows:

Return

Since

Ticker

Published

Position

(NYSE:AER)

-31.12%

Long

(NYSE:LUK)

-16.81%

Long

(NYSE:TGI)

-38.69%

Long

(NYSE:NRF)

-51.75%

Long

Equal-Weighted Return

-34.59%

Click to enlarge

4. Pair Trade Contest

Click to enlarge

Tabular data follows:

Return

Since

Ticker

Published

Position

(NYSE:LVLT)

-13.57%

Long

(NASDAQ:GILD)

29.34%

Short

(NYSEMKT:UEC)

57.18%

Short

Equal-Weighted Return

24.32%

Click to enlarge

5. Contrarian Contest

Click to enlarge

Tabular data follows:

Return

Since

Ticker

Published

Position

(OTC:HGRVF)

-25.93%

Long

(NYSE:SEAS)

-7.38%

Long

(NYSE:NGS)

-29.42%

Long

Equal-Weighted Return

-20.91%

Click to enlarge

6. Large Cap Contest

Click to enlarge

Tabular data follows:

Return

Since

Ticker

Published

Position

(NYSE:CIB)

-18.30%

Long

38.97%

Short

Equal-Weighted Return

10.34%

Click to enlarge

The Diamond Resorts Short Pick

The Diamond Resorts Seeking Alpha article is available, here, to SA PRO subscribers. It will be available to non-subscribers on February 19 at 11:43 AM. A description of the firm, from Yahoo! Finance follows:

Diamond Resorts International, Inc. operates in the hospitality and vacation ownership industry in the United States, Hawaii, Canada, Mexico, the Caribbean, Central America, South America, Europe, Asia, Australia, New Zealand, and Africa. The company operates in two segments, Hospitality and Management Services, and Vacation Interest Sales and Financing. It provides hospitality and management services. The company has 93 resort properties, 236 affiliated resorts and hotels, and 4 cruise itineraries. It also offers vacation ownership program. The company was incorporated in 2013 and is headquartered in Las Vegas, Nevada.

Below is the 1-year chart for Diamond Resorts, through February 9, 2016:

Summary - The Advantages of Entering Future Seeking Alpha Contests

This was my first attempt and entry into a Seeking Alpha contest. The compensation is $35 plus $0.01 per click plus free access to Seeking Alpha PRO for 30 days (about $200-$300 value).

Seeking Alpha runs stock pitch contests on a regular basis. These contests bring together sophisticated professional and private investors from across the globe to share their best ideas on the given contest's theme. The SA PRO editorial team will select the winners with input from PRO subscribers. All contest entries will be available for viewing only to PRO subscribers for the duration of the given contest. We will display all published contest entries to all Seeking Alpha readers one month after their original publication date.

In my case, finding that n=4 of N=58 submissions recommended a short position in a single stock - SolarCity - was very helpful. The great value, in my humble opinion, is the access to Seeking Alpha PRO and the confirmation of my own thoughts for this stock.

The competition is strong, but I will look forward to entering future SA contests. I encourage others to consider doing the same. I may not identify the "best" pick, but I continue to enjoy the comments/feedback in my ongoing quest to identify profitable trades and additions, long or short, to my long-term portfolio. That is why I am here.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Editor's Note: This article covers one or more stocks trading at less than $1 per share and/or with less than a $100 million market cap. Please be aware of the risks associated with these stocks.