How to Profit From Shorting Newly-Listed Tech Stocks
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Editor’s Note: Justice Litle says new and exciting tech start ups often face a heavy dose of reality in the year after their IPO. It’s stock price falls off the peak it has climbed. This, says Justice, makes clever short plays a lucrative strategy…
When Microsoft Attacks
by Justice Litle
VMware (NYSE: VMW) is a sexy tech company that made investors a lot of money on the way up. It had a huge IPO in 2007 and climbed to lofty heights.
But a few weeks ago, my friend Cash McDash called out VMW as a strong potential short play. (You can verify the call for yourself. See “This High-Tech Darling Could Crash and Burn.”)
In recommending a short in the $65 area, Cash noted (among other things) that competitors could put a big dent in the VMware story.
Sure enough, one of the biggest and baddest competitors showed up a short time later… none other than Microsoft. News that Microsoft (NASDAQ: MSFT) will be offering a competitive product — at a sharply lower price, no less — has sent VMW shareholders running for the exits. The stock probably has further downside ahead.
This kind of thing happens a lot to hot new issues. Six to twelve months after the IPO, reality comes barging in. If it’s not a bruising competitor like Microsoft, it’s something else that pours cold water on the enthusiasm. You see it a lot with glamor stocks that get ahead of themselves.
As a new-issues trader who goes both ways, my friend Cash McDash loves these situations. He’s got an eagle eye when it comes to spotting high-flier short setups.
If you don’t mind dabbling on the “dark side”… or if you just want an early warning on some of the high-profile longs in your portfolio… you should keep tabs on what Cash has to say. Stay tuned for more on that front soon.
Source: When Microsoft Attacks!
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Tags: investing in tech, Justice Litle, MSFT, VMWAbout the Author
Justice Litle, Executive Editor for the Taipan Publishing Group and of the Free E-letter, Taipan Daily, has a unique background that has served him well in the markets. Originally pursuing a PhD and a life in academia, his career path changed forever after discovering The Investment Biker, Jim Rogers chronicle of macro investing by way of motorcycle.
Taipan Daily is your free resource for late-breaking investment opportunities to help you beat Wall Street to the profits. Filled with investment analysis and insight from every sector. Taipan Daily delivers just the right blend of safe opportunities with the fast-moving plays, so you have an insider's edge over Wall Street and other investors.