Editor’s note: This article was first published in June 2014; the GM share price, the ignition-switch recall scandal and the CEO’s questioning in Congress, the Seeking Alpha earnings growth forecast and the Wall Street market mood it describes are all from that month. This June 2014 short sale was the author’s own speculative trade, kept as a historical record. It is not investment advice.
In a purely speculative move, this afternoon I decided to open a short position in General Motors, selling at $36.72, to take advantage of the loss of “momentum” in the company’s image and the recent problems it has been having.
After reading an article on Seeking Alpha giving several reasons to buy General Motors, I think the expectations placed on this company for 2014 and 2015 are too optimistic, since they assume the company’s earnings will grow at a compound annual rate of 22% over the next five years. In the long run the company will probably find a healthy path, but I think that for what is left of 2014 it will cause its shareholders a few headaches.
The fact that Warren Buffett has sold 10 million General Motors shares and David Einhorn has liquidated his position in the company, getting rid of around 17 million shares, also helped me make the bearish call.
The other question is whether the Wall Street indices are showing signs of exhaustion or are simply short of news these days to keep the bull party going.
As you can see, after three years of high returns, I am taking on a bit more risk with my investments and putting myself to the test, because I admit I am much better at spotting long-term opportunities on the upside than at speculating.
I will shortly review the stocks I hold in my portfolio and a few positions that have gone “a little” wrong for me.
Featured image: Joe Ross from Lansing, Michigan, CC BY-SA 2.0, via Wikimedia Commons.
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