The Best Bets of a Stellar Short Seller – Mark Roberts by Bill Alpert, Barron’s
Mark Roberts started Off Wall Street Consulting Group in May 1990. In the years since, his Cambridge, Mass.–based team has cranked out hundreds of well-researched investment ideas for his money-manager clients—mostly on the short side, probing stocks it thinks will decline. Roberts has shared his ideas with Barron’s readers from time to time, and they usually pan out. He highlighted several in a recent conversation.
Barron’s: You’ve got an anniversary that you’ll be celebrating.
Mark Roberts: We started May 1, 1990, so this is the 25th anniversary of Off Wall Street. We just launched a new Website: offwallstreet.com. We are the longest-surviving company of our kind.
What has your record been in that time?
Since we started, we have recommended 450 positions. We’ve closed just under 80% with gains and the balance with losses. And we’ve done better than the inverse of the Standard & Poor’s 500 index every year. We publish about 20 short-sale recommendations in a year, and maybe four or five Buy recommendations. In the past 20 years, we have outperformed the inverse of the S&P 500 by an average of 18.4 percentage points per year.
Tell us one of your current ideas.
The auto sector has been hot for a long time, and it has given us some good short opportunities. DealerTrack Technologies is one. This company [ticker: TRAK] had a good business when it started in 2001. It provides a network to connect financing sources and auto dealers. When you ping the financiers with your credit application, they get a fee.
How has that business been doing?
It is experiencing a strong period now. It is a cyclical business, tied not only to car sales but credit availability. If you are a subprime borrower, you are pinging more lenders than you would with a prime credit application. But that business is near a cyclical peak in terms of credit availability and auto sales.
Why do bulls like Dealertrack’s prospects?
Starting about 2005-’06, the company began acquiring other software companies in the auto area. The bull case is that now they are a big, integrated suite of products, a SAAS [“software as a service”] company. Our short thesis is really about this subscription software business. Since we started to write about this two years ago, they’ve been promising that the subscription software business would be accelerating growth. That never happened.
See full article here by Barron’s