When it comes to investing, short selling offers unique advantages you don’t get when buying up stocks on the long side. However, you have to know where to look for quality short ideas that will earn you a profit, and the Contrarian Investor Virtual Conferences have proven to fit the bill.
Contrarian Investor Virtual Conference Series
Contrarian Investor Virtual Conference No. 5
ValueWalk started holding its Contrarian Investor Virtual Conferences in partnership with the Contrarian Investor Podcast and Breakout Point in 2020. Several reputable contrarian investors have presented their short ideas at the conferences, and we’ve seen many stock prices fall as a result of those presentations.
Advantages of short selling
Short selling involves borrowing shares of a company’s stock at the current price because you expect them to decline in value. When the stock price falls after you’ve borrowed shares at the higher price, you earn a profit on the transaction.
Before we get into details about the Contrarian Investor Virtual Conference itself, let’s talk about the advantages of short selling as an investing practice. One of the greatest advantages of short selling is the fact that it enables you to profit even in a bear market. When stock prices are falling, it can be difficult to pick winners, which makes it easier to bet against companies and win.
Another advantage of short selling is that it enables you to hedge your long positions by betting against something that somehow complements your long investments. Further, short selling enables you to turn a profit on a stock you missed out on by borrowing it after it has increased in value beyond what it’s worth. Then you can turn a profit when the stock corrects itself.
How to get the advantages of short selling
As with all types of investing, there are some caveats when it comes to short selling. It is easy to get into trouble and end up with a stock whose price just keeps going up, forcing you to cover your position at a loss. As a result, the most important thing to keep in mind is that you should be fairly sure of yourself when you short a stock.
Some would argue that you must be more certain of your short positions than your long ones because the default movement for stock prices is up. Thus, you must know where to look for short ideas that will be more likely to pay off. For the maximum advantage in selling any stock short, you’ll want to get in before too many short sellers have borrowed shares, inflating the borrow cost.
One of the best ways to come up with good ideas about which stocks to short is to follow some of the big conferences that are held each year. The downside of this is the fact that most conferences are held annually. However, the Contrarian Investor Virtual Conference is held multiple times a year, so it provides more opportunities for you to learn about some high-quality short ideas.
Ideas from the first Contrarian Investor Virtual Conference
One of the ideas pitched at the first Contrarian Investor Virtual Conference was New Pacific Metals Corp., which was suggested by Nate Anderson of Hindenburg Research. He called attention to political risks for the company, which had been working with the Evo Morales administration in Bolivia that was ousted in a coup in November 2019. The new administration accused the Morales administration of corruption in connection with New Pacific’s project.
Anderson also suggested that New Pacific’s mining concession may have violated Bolivian law. He also said New Pacific management had been accused of inflating silver grades. Anderson argued that there was 90% downside to New Pacific shares before his presentation at the April conference.
Geoinvesting and Quintessential Capital Management also presented short ideas at the first conference. Quintessential pitched Akazoo, and you can read the full thesis here. Akazoo shares plunged 40% in just a few minutes after that presentation.
Ideas from the second conference
Grizzly Research CEO Siegfried Eggert presented his short idea for Hebron Technology at the second Contrarian Investor Virtual Conference in June. The stock plunged 25% after his presentation and hasn’t regained all of its value since then. Eggert pointed out that Hebron stock had skyrocketed after private placements and acquisitions and alleged that the company was running an insider enrichment scheme.
He highlighted connections between the company’s insiders and many of its transactions, revealing links that were never publicly disclosed with the transactions. Eggert also said that based on SAIC filings, the financials Hebron reports to the Securities and Exchange Commission were “substantially inflated.”
Interestingly, Hebron announced recently that it was changing its name to Nisun International Enterprise Development Group and changing its ticker from HEBT to NISN. Even though the ticker symbol changed, it still has the history from when it was trading as HEBT.
Guyan Liu of Miles GL Capital also presented a short idea at the second conference.
Short ideas from the third Contrarian Investor Virtual Conference
In August, Bradley Safalow of PAA Research pitched Trupanion as a short, saying it was one of his favorite short ideas and possibly the best short he had come across in his career. Trupanion shares tumbled following his presentation, although they have since recovered.
Safalow believes the stock is worth less than $10. He described the pet insurance company as “a structurally flawed, unprofitable company positioned to growth investors as a tech/ SaaS story.” He also argued that Trupanion would never be profitable.
Ideas from the fourth conference
At the fourth Contrarian Investor Virtual Conference in October, White Diamond presented its short idea for eXp World Holdings. They described it as “a bubble about to burst.” The stock climbed over 400% since mid-May, inflating its market capitalization to $3.3 billion.
However, White Diamond pointed out that eXp’s closest peers are ReMax and Realogy, which have market caps of $630 million and $1.1 billion, respectively. Further, eXp’s gross profit was $84 million, compared to Realogy’s $1.1 billion profit and ReMax’s $210 million profit.