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  • Dear Interested Short Sellers 2 comments
    Feb 11, 2012 8:45 AM | about stocks: EGLE

    Dear Interested Short Sellers,

    This post is directed to those potential Clients who are not in IRA accounts but who have standard taxable accounts and who are also interested in short selling. I have been finalizing my system to identify stocks that are so overbought and so poorly managed that they are excellent candidates for short selling. In other words buying a stock and making money as it goes down. In order to verify the system though, I have had to do a series of backtests to prove it.

    The following is a back test I did on Eagle Bulk Shipping (NASDAQ:EGLE) which on May 16, 2008 hit an all time high price of $33.09 (Adjusted Close).

    Here is a description of what they do:

    BUSINESS: Eagle Bulk Shipping Inc. operates as a marine transportation company. It provides ocean transportation for a range of bulk cargoes, including iron ore, coal, grain, cement, and fertilizer along worldwide shipping routes. As of March 31, 2011, the company owned and operated a modern fleet of 40 vessels (38 Supramaxand 2 Handymax), with a combined carrying capacity of about 2,200,000 deadweight tons and an average age of 4.8 years. At that date, it had commitments for six ''new build'' ships. Has 65 shore-based employees. Off./Dir. own 3.3% of common stock (4/11 proxy). Chairman and CEO: Sophocles N. Zoullas. Inc.: Republic of the Marshall Islands. Address: 477 Madison Ave., New York, New
    York 10022. Tel.: 212-785-2500. Internet: eagleships.com.

    In 2009 one of my clients Dr. P actually asked me about it as his son Lance was interested in buying it, after having seen a great number of their trucks on the roads. I recommended against it as Eagle had run a negative cumulative owner earnings (COE) of $-25 a share from 2005-2008 and was a disaster waiting to happen in my opinion. Recently because the Baltic Dry Index (which measures marine shipping rates) has fallen to its lowest point in years, I was interested in researching if there were any potential short ideas available in that industry. From there I noticed Eagle and decided to run the numbers of what my system would have shown on May 16, 2008.

    Here are the results of that analysis according to Friedrich:

    When I go long a stock I look for a minimum of 85%(but try to buy at 100%) for the Final Score, with the worst being -50%. So as you can see my system had Eagle Bulk Shipping come in at -45%. The company also had a FROIC of -20%, which means they were losing -20 cents in owner earnings on every $1 dollar of total invested capital. I also designed my Friedrich system to analyze a stock from two totally different view points, from a purely quantitative(50%) and qualitative(50%) point of view. My quantitative system is called MYCROFT and my qualitative system is called SHERLOCK. A perfect score on each will result in a +10 and +10 for a total of 20, which I then multiply by 5 giving me a perfect score of 100%(when I buy). As you can see Eagle came in with a -9 when my Mycroft and Sherlock scores were added together. Had you taken Friedrich's advice then you would have shorted Eagle Bulk Shipping on May 16, 2008 and the following chart will show you how you would have done.

    So as you can see my Friedrich system, which took me some 30 years to design can really allow me to short with confidence. Why did the stock go to $33.09 a share in the first place? Because most investors do little if any research at all when they buy, so they shoot stocks to the moon, like they did in the dot.com era for example, and create tremendous opportunities for professional analysts like me to take full advantage of their mistakes. I will never disclose the inner workings of my Friedrich system because as you can see it is extremely powerful.

    Therefore all my Clients will have the advantage of going long and those in taxable accounts will also be able to go short as well. So if you are interested in potentially opening a Client account please contact me and I will implement such a strategy on your behalf. The amazing thing about these results is that the stock went down even though the market corrected 80% since its March 2009 low. Eagle continued to go down regardless of the market recovery. So whether going long or short I should be able to find stocks that will knock the ball out of the park in most cases.

    Mycroft Psaras

    Portfolio Manager

    Mycroft Research LLC.
    mycroft@mycroftresearch.com
    www.mycroftresearch.com

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

    Themes: Short Selling, Short Stocks: EGLE
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Comments (2)
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  • turkishharem
    , contributor
    Comments (21) | Send Message
     
    Peter,

     

    It appears that the links to images hosted on philosophyofinvesting.com are not working or broken. I bring it to your attention because I was interested in seeing your charts on EGLE.

     

    Aside from that, keep up the good work publishing and contributing.

     

    -Jason
    29 Feb 2012, 11:16 PM Reply Like
  • Mycroft
    , contributor
    Comments (648) | Send Message
     
    Author’s reply » Hi Jason,

     

    Send me your email, here is an article I wrote yesterday:

     

    http://bit.ly/ym8vee
    29 Feb 2012, 11:33 PM Reply Like
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