When an investor believes a stock is overvalued and will soon drop in price, he might decide to "short" it. First, he borrows an amount of the stock, and then sells it. He waits for the stock to tank before buying back the same amount of shares at a deflated price.Read more...
When an investor believes a stock is overvalued and will soon drop in price, he might decide to "short" it. First, he borrows an amount of the stock, and then sells it. He waits for the stock to tank before buying back the same amount of shares at a deflated price. After returning the shares to his lender, he pockets the difference--unless any one of several hard-to-predict variables interferes, and the stock fails to drop.
Since these variables are so hard to predict, short selling is difficult for even seasoned investors. It takes great talent and experience to isolate the best short ideas for falling stocks--skills Amit Kumar developed and honed over decades of market analysis and trading. This book shares his short-selling framework, built on themes common to falling stocks and the market's endemic strengths and cycles. Featuring key case studies and exclusive interviews with successful fund managers Bill Ackman (Pershing Square Capital Management) and Mark Roberts (Off Wall Street Consulting Group), Kumar shows investors how to avoid traps and profit from well-researched short ideas. Investors may not always act on short ideas, but they can avoid losses by using Kumar's framework to identify overvalued stocks. Professionals and amateur investors alike will benefit from this fundamental research approach, which transforms short selling into a long-term strategy.
- ISBN-13: 9780231172240
- ISBN-10: 0231172249
- Publisher: Columbia University Press
- Publish Date: December 2015
- Page Count: 256
- Reading Level: Ages 22-UP
Series: Columbia Business School Publishing
Publishers Weekly® Reviews
- Reviewed in: Publishers Weekly, page .
- Review Date: 2015-09-07
- Reviewer: Staff
Kumar, a senior analyst at Columbia Threadneedle Investments, offers a guide that shows how experienced investors can avoid pitfalls, reap profits, and identify overvalued items while short selling stocks, in this complex but useful book. Addressing the stock market savvy, he shows how to find new ideas for short selling. Kumar divides the book into three sections, entitled Framework to Finding Short Ideas, How Successful Investors and Analysts Think, and Risks and Mechanics of Short Selling. In addition to detailing his framework, Kumar explains the advantages and disadvantages of leveraged businesses and various accounting red flags. He also examines the principles set forth by Ben Graham, described as the father of value investing, and presents interviews with noted value investor Jean-Marie Eveillard; activist investor Bill Ackman; and Mark Roberts, founder of Off Wall Street, an independent research firm for hedge funds. Kumar also discusses deciding when to hold or sell, offering examples of common mistakes and traps, and offers up numerous case studies on companies in a variety of industries, including Southwest Airlines, Ciena Corporation, Office Depot, and AIG. Those with investment skill and knowledge who are prepared to enter this inherently risky area will find Kumars theories valuable, but the average investor will not find the key to profitability here. (Nov.)