August 20, 2010
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:
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