Jim Chanos, founder of $6bn Kynikos Associates, has disclosed what he’s looking for as a short seller: an exodus from a company, a large amount of stock sales, and companies impacted by technological change (the internet being his perfect example).
He advises that in shorting you have to be very careful of not shorting concepts and being short companies. To reinforce the importance of the fundamental facts on a company he states that is a necessity for investors to read the SEC filings from companies. He notes with amazement that many investors don’t do that reading.
Top quote: “The sector we are giving a lot of attention as potential shorts is the retail sector – it is one which will have a lot of roadkill on it.”