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Both of my two worst calls so far have been on shorting good companies on my perception of current overvaluations.
I don't do this in real life - and CAPS has reinforced that I should not.
It also makes an argument for holding rather than selling an existing holding based on valuation - you may not get a reentry point.
Zz
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Yeah I agree with this and have had the same experience. Overvaluation is not enough. You really need some business deterioration catalyst on the horizon to knock the stock price down. Something like margins collapsing, looming bankruptcies, superior competitor on verge of taking over market, drug failure expected, ect.
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Google being a rather classic example here. I still think there are some catalysts to knock down the darn thing, but for now, the market disagrees with me.
Steve
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Shorting on perceived overvaluation
Yet I feel that the willingness to try is essential to 'stock rating system' aspect of CAPS.
I'll likely continue to try it from time to time - willing to get an added lesson here and there.
Zz
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Well that communicated poorly - what I meant to say was I will try to look for the catalyst to support the short thesis.
Zz
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Kahuna,CFA:
Actually, believe it or not, Google is undervalued - at least according to ValuePro.net: http://www.ValuePro.net. According to that web-site, the Intrinsic Value of Google(GOOG) is $905.
Wouldn't that be enough to seriously start discounting ValuePro.net's IVs?
Steve
