John Hempton on the Art of Short Selling

John Hempton on the Art of Short Selling

John Hempton presenting “Adventures in Shorting Companies with Questionable Accounts” at the 8th Annual Value Investing Congress.

John Hempton on the Art of Short Selling

John Hempton of Bronte Capital Management will be in at twelfth at Value Investing Congress, with his presentation titled: “Adventures in Shorting Companies with Questionable Accounts.”

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John Hempton is chief investment officer and founder of Bronte Capital, an Australian based global asset management firm. He was formerly a partner at Platinum Asset Management and has served as chief analyst of tax policy for the New Zealand Treasury.

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John Hempton Live Coverage

3:35 PM EST: Hempton is taking the stage. He’s a famed short investor who targets what he calls “frauds scumbags, rats.”

3:38 PM EST: Hempton looks for companies that are faking their earnings reports. According to Hempton, fake earnings results in fake balance sheet.

3:40 PM EST: Hempton says he’s currently short 120 companies.

3:40 PM EST: “Auditors don’t check income, they check balances.”

3:40 PM EST: If a company is entirely fake, it’s easy for them to report 10 X growth.

3:41 PM EST: In China fake cash is quite common, says Hempton.

3:42 PM EST: Hempton includes the following in possible “fake assets” fake cash is often turned into Receivables, Inventory, PP&E, Goodwill.

3:46 PM EST: Hempton recommends a short on TransGlobe Energy. The firm sells oil but doesn’t collect for seven months according to Hempton.

3:48 PM EST: Hempton says the TransGlobe Energy balance sheet is pretty weird.

3:50 PM EST: TransGlobe Balance Sheet doesn’t show any inventory.

3:51 PM EST: Second short of the day, Suntech a Chinese Solar company.

3:52 PM EST: Suntech overstated profits by $686 million.

3:58 PM EST: Another idea, Jos A Bank. Hempton says he can’t tell if the company’s high inventory is real despite high sales.

3:59 PM EST: Jos A Bank is mens’ clothing retailer with outlets in 42 States.

4:03 PM EST: PureCircle, a maker of Stevia natural sweeteners, has several balance sheet red flags.

4:06 PM EST:PureCircle looks bad because OLAM is a big investor. Muddy Waters famously shorted OLAM last year.

4:07 PM EST: Muddy Waters followed John Hempton in researching Focus Media Holding earlier this year, taking inspiration from his work.

4:13 PM EST: Here’s what we’ve been waiting for, Hempton says most Herbalife distributors are just preferred customers, simply avoiding a sales tax.

Hempton’s Picks For Tonight: TransGlobe, Suntech, Jos A. Bank, PureCircle, Herbalife

Presentation Finished.

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