When Not to Short

Recently, a reader asked us on Twitter about shorting AT&T (NYSE: T  ) . Several of our analysts chipped in to answer, and you can read about it here.

In our video below, Fool analyst Rex Moore expands on this. With all the network problems and dropped calls, our reader was no doubt thinking how disliked the carrier seems to be. What's more, it seems many are waiting to buy an Apple (Nasdaq: AAPL  ) iPhone until it's available on another carrier (like Verizon (NYSE: VZ  ) early next year, maybe?).

But Rex's advice is to avoid shorting companies where everyone already knows about all the bad news -- and thus it's already priced into the stock. Another example was Ford (NYSE: F  ) about a year ago. It still faced a wall of pessimism even after it became clear it wasn't going bankrupt, and that it didn't need Troubled Asset Relief Program money to survive. David Gardner even recommended it in Motley Fool Stock Advisor last November, and it's up about 40% since then.

Bottom line: A good short would be the opposite of what we're talking about -- a company you've identified as facing a lot of troubles and perhaps an eroding competitive advantage that not many investors know about, and whose stock price has a lot of good news priced in.

Watch the video here:

For more analysis, visit FoolTV.com.

Fool analyst Rex Moore is very short with whiners. He owns no companies mentioned here. Apple and Ford Motor are Motley Fool Stock Advisor recommendations. Try any of our Foolish newsletter services free for 30 days. The Motley Fool has a disclosure policy.


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Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On August 20, 2010, at 6:00 PM, samik100 wrote:

    Hello motley.

    Nokia is going to come back and the company always pays dividends.

    Nokia is a visionary company.

    I hope Apple is one too, time will tell.

    Nokia has been good to me over the years.

    I like high risk also but when a company comes through every time, i like it.

    Best regards, sam

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