Breaking Down The Shorts (Podcast)

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Includes: AAXN, ACHC, APHA, CARG, CBRL, CRI, EBIX, HIIQ, INSY, MIK, MOMO, PHM, SIG, WMK
by: Behind The Idea
Summary

We wrap up our coverage of the Kase Learning Shorting Conference by reviewing our favorite parts of the day-long conference.

One theme? Participants had a bit more of a bounce in their step as market volatility makes a short book more relevant.

At the same time, a lot of these shorts were the same old names.

By Daniel Shvartsman

Being a short seller takes a certain type of personality. I've argued that any value investing decision is inherently contrarian since you are betting the market is wrong, but that's doubly so if you are a short seller, since stocks tend to go up. From there, you are also going directly against a management team in telling them their company is overvalued if not worse. And you are going against all the longs, telling them that their work on this stock might not be good enough. The person who does this publicly comes under a great deal of scrutiny, and has to have a certain acceptance of that, or at least a way to cope.

So it's no surprise that the short-selling community is relatively small, and that ideas flow freely among people practicing this approach. That's something we noticed when attending last week's Kase Learning Shorting Conference - Mike Taylor also went to the conference in May, and said there was plenty of overlap in the attendees. We also recognized a lot of the stocks covered, and there was some comment on how these ideas have bounced around various funds and investors.

Still, if there's still an attractive set-up, it's worth pitching an idea. And the backdrop for the second Kase Learning Conference this year is much more attractive for short sellers than May. With two months of volatility going into the conference, there was a bit more bounce in the presenters' and audience's step. There was a sense that the market might turn in the near future. That wasn't all roses - several presenters talked of a societal and investing landscape that has become fundamentally flawed in their view - but short sellers are here for the thorns as much as the roses.

In our first ever Behind the Idea recorded with the two of us in the same room, Mike and I spent last Tuesday breaking down the prior day's conference. We talked up our favorite ideas as ideas, our favorite presentations, and the big themes and takeaways. Have a listen:

Topics covered:

  • Intro to Kase conference – 0:00 minute mark
  • Favorite ideas Aphria and Michael’s – 4:15
  • Other stand-outs – Axon, CarGurus, Ideal Bike, CarGurus – 11:00
  • Is the market turning? – 21:15
  • Favorite presentations, as far as the actual approach – the David Berman thesis – 24:15
  • Carson Block’s presentation on activism in short selling – 34:30
  • Takeaways from the conference as a whole – the community, and the limited number of new pitches - 48:00

If you want to review the full list of ideas and discussions, check out this article as a compliment to the podcast.

That concludes our Kase Learning Shorting Coverage. If you're interested in previous installments, here's the full list:

We're going into year-end coverage to finish out the year, with a special review of our coverage for the year next Tuesday and then a bonus episode during the holiday week. After that, we'll resume publication as normal in 2019.

What do you think about these ideas? Anything stands out to you? What about Carson Block's case for the moral short, or the revelation of inventory/sales? Do you think more short ideas are opening up as we pull back, or is buying the dip going to blow them all out of the water? Let us know below.

Editor's Note: A transcript of this call is available here if you'd like to read as you listen.

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. I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: Neither Mike nor I have any positions in any stocks discussed. Nothing on this podcast is meant as investment advice.