Episode 386: Simple Yet Powerful Tips for Short Selling – Exposing the Red Flags
On this week's Stansberry Investor Hour, Dan and Corey welcome Edwin Dorsey to the show. Edwin conducts deep, investigative analyses of public companies in his newsletter, The Bear Cave. By prioritizing customer relations and common-sense logic over financial data, he can gain an edge and find troubled companies for his subscribers before Wall Street does.
Edwin kicks off the show by explaining how he got his start doing short-selling research and how he identifies prime opportunities for shorting. Rather than focusing on the financials, he hunts for $1 billion to $10 billion companies in the technology or consumer sector with bad customer relationships. Edwin shares case studies of how he discovered safety issues at two child-focused companies. The first was caregiver platform Care.com, which wasn't properly vetting its caregivers. The second is Roblox, which has ongoing issues with child predators and gambling...
It's terrible. It's crazy the lack of moderation and control that this company has over its user base and currency. And I think it's deliberate to try to boost the numbers that they're not shutting this down. I've even talked to former executives and employees who left the company a year or two ago. And almost all of them say the company is aware of these issues. They don't want to fix it.
Next, Edwin talks about why candy maker Hershey could face long-term issues now that trendy competitor Feastables is steadily stealing market share and doing a better job of appealing to the younger generation. As he points out, most investors tend to be older and male, so there are often blind spots for companies catering to youth and female demographics. Edwin also makes his bearish case for the predatory fitness-center company Planet Fitness. With the Federal Trade Commission working to make canceling memberships easier, this is bound to hurt the stock...
What Planet Fitness does to circumvent [credit-card disputes] that's really brutal and shows you how much of a bad actor they are is they don't let you sign up with credit cards. They force you to link your checking account or use a debit card because then there's no dispute mechanism... They want to keep billing you against your consent.
Finally, Edwin names several companies that are doomed thanks to the rise of artificial-intelligence technology. He highlights call-center businesses and tax-service providers in particular, but also warns of downstream effects. After, Edwin talks more about how he first got interested in the financial world, how he learned that the numbers don't matter if the underlying business is not sustainable, and how he picks which stocks to go long...
I own just two individual stocks... I like profitable businesses. I prefer microcaps. I like businesses that are honest. It just needs to be doing something I find useful in the world. I don't want gimmicky. I don't want promotional management... If I find that, I'll bet big on it.
Click here or on the image below to watch the video interview with Edwin right now. For the full audio episode, click here.
(Additional past episodes are located here.)
The transcript is coming soon.