Tuesday, October 29, 2013

Short Stories

Artham Capital founder Amit Kumar has written a book called Short Stories, which covers the important basics of short selling. I'm not a short seller, nor do I envision myself becoming one anytime soon, but I read it anyway. I often find myself on the other side of a bunch of short sellers; knowing how they think and what their limitations are can be useful.

The first thing to realize is that while short selling is pretty much the opposite of going long from a mechanical point of view, the short seller's mindset cannot be simply the opposite of that of a buyer. This is because there are a number of key differences between going short and going long that force the short seller to alter his approach. Some of these differences include interest payments (because shorts have to borrow shares from those who own them), timing (the lender can call these shares back), and the return profile (a stock can rise infinitely, vs a long, whose maximum loss is what he paid for a stock).

Kumar discusses these and other factors and how they influence what constitutes a good short candidate. Demonstrative case studies can be found throughout the book, helping illustrate why certain heavy shorts ended up going right for short sellers, and why others went wrong. Some of the insights offered are similar to those provided in only the most sophisticated investing blogs and stock investing forums.

I found the book helpful, particularly the case studies, to better understand what a short seller needs to have happen in order to be right. Enjoy!


楊大寶 said...

Hi Saj,

I would like to recommend "Buyout: The insider's guide to buying your own company". (http://goo.gl/b9quKs) I read this book a while ago. It describes the process of a competent manager making a leap to acquire his company. Very informative.

Saj Karsan said...

Hi 楊大寶 ,

Sounds interesting, thanks!