It’s been a while. My apologies to the followers who have been waiting each day for a blog post, the campaign trail has been hot and heavy and I’ve only had time to deliver the hot shorts. However, with a market rally that seems to be kicking the bears, I felt it was about time I come out and elaborate on some of the Hot Shorts. I know you were as glad as I was to see a 2%+ gain on the Hot Shorts yesterday.
Here’s some more on today’s picks:
WYNN – This is the 6th time I’ve named Wynn Resorts as a Hot Short. You know managers have been pumping this stock because the price jumps are on low volumes. News wires are hailing Wynn for it’s exposure to Macau, the apparent new gambling mecca of the world, and earnings are expected to come in strong. The earnings call is scheduled for tomorrow (thursday), which would be great if Macau wasn’t already priced in. What investors are not accounting for is sluggish US demand in the gambling market and a possible China slowdown. Any shift in Asia sentiment kills both Macau and Singapore Projections. The stock is also risk exposed to the airline industry; airline cuts (to/from vegas specifically) could pull this share price down even further. WYNN is overbought going into earnings tomorrow, so if you aren’t shorting today, quickly sell the pop after tomorrow’s earnings call for maximum profit potential.
ARNA - I’ve been calling Arena Pharmaceuticals almost every day for a week, and it still has yet to cooperate. The share price has seen a 100% increase in the past 30 days, and it wont be able to sustain it much longer. Plus, investors are already pricing in September’s FDA meeting as if it’s guaranteed to be positive. We’re definitely going to see it start tracking back and settling down before the September 18 meeting, so get selling!
FRO – Frontline Ltd. is a lesser known shipping company which owns and operates oil tankers and OBO carriers. Their steady decline in ROE since the 2007 highs shows that the the stock is highly susceptible to a macroeconomic risk. The company has extreme exposure to VLCCs, especially after recent fleet upgrades, therefore exposing shareholders to massive risk. By moving oil in the bulk that VLCCs do, they are the vessel class to take the biggest hit from lower than projected growth or decline in oil demand and/or OPEC production. VLCCs gain substantially from a rising ton-mile, but on the downside, they suffer the most. Think of it like the Titanic. If shares are going to sail, theyr’e going to do so extravagantly and massively, but if they sink, they’re really going down. If you’ve got a taste for a little risk in your portfolio (with huge profit potential), a short on FRO is for you.
C - Citi is my number one TDSR pick, i’ve now called it 13 times. I think 13 could be the lucky number. Government overhang still looms, with no growth and stagnant management. An unemployment uptick to 10 could trigger new bank stress tests, which could be devastating for Citi. I see this one going way lower, be sure to be on the sell-side.
VLTR – My last pick for this morning was Volterra Semiconductors, which has seen a big run up from 21 to 28 June to July, by beating projected revenues. However, it fell short of expectations, and slower than expected adoption of chip design for notebook computers could hurt the company. They’re also exposed to risks in slowdown of enterprise IT spending, and share loss of Intel’s next generation platforms. They’ve been pumped by a string of recent strong analyst reports, but I see downside potential in this overbought stock.
Since I don’t have much time for blogging at the moment being on the campaign trail, I’ll try to stick to delivering you as many facts as I have as briefly as possible. Be sure to keep up with TDSR, as we keep finding new ways to deliver you the unique market information you want.
Disclosure: no positions/do not trade