I think the market is due for volatile few months for myriad reasons which I highlighted yesterday. Given this view, I am starting to increase my short positions as well as keeping a substantial amount of my portfolio in cash as I believe lower entry points will be forthcoming. One new short that I will be taking today is Concur Technologies (CNQR). Its valuation seems extreme given its projected growth rate and it could be a significant casualty if we get a significant selloff in equities, which I think is likely over the next few months.
Concur Technologies, Inc. is a global provider of on-demand Employee Spend Management solutions
8 Reasons CNQR looks like a good short at $70 a share:
- The stock is selling at the very top of its five year valuation range based on P/E and P/CF.
- Insiders have sold over $10mm in shares in the third quarter in myriad and frequent transactions. There have been no insider purchases in over two years.
- Wunderlich just downgraded the shares from a "Buy" to a "Hold". Oppenheimer downgraded the stock as well in September. CNQR also is sitting at its mean price target held by the 16 analysts that cover the stock.
- An investor is paying 62 times forward earnings for a company that is growing earnings at less than 20% a year.
- The stock has a five year projected PEG of over 3 (3.11). This is excessive given its growth projections and market capitalization (just under $4B).
- Net Income has increased much faster than operating cash flow over the past three years. In addition, Non-GAAP reported figures seem to show much better performance than GAAP results.
- Two of the main drivers of demand for this company's software (job growth and business travel budgets) are likely to remain subdued in at least the medium term.
- After rising more than 80% in a year to hit a historical high of over $76 a share, the stock looks like it is topping here (See Chart).
Disclosure: I have no positions in any stocks mentioned, but may initiate a short position in CNQR over the next 72 hours.