Investing Wisdom series 4: Checklist for shorting stocks [7 mins]

Quick checklist from the book ‘The Art of Short Selling’ written by Kathryn F.Staley. One of the masterpieces on the art of short selling.

A checklist for shorting stocks:

  • Analyse the financial statements
    • Fuzzy assets, inventories, receivables
    • Proxy statements
    • Cash flow is the King!
  • Greed and Sleaze
    • Management pay scheme
    • Proxy statements
    •  Options awarded to management
  • The big puzzle
    • Store checks
    • “Grass-root research”
    • Non-Sell-Side research
    • What do competitors say about the company?
  • Who owns the stock?
    • High institutional ownership is great for a fast collapse
    • Management ownership level
  • Wall Street reports:
    • See what the bulls are saying
    • Taking the temperature – are they “defending”?
  • Pay attention!
    • Listen to the earnings call
    • Every short is different and no two follow exactly the same pattern
    • Watch timing-stalk the company before shorting

If you are interested to learn more about Short selling, then I would highly recommend the book “The Art of Short Selling”. You can buy the book from here

 


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