Following on from the last post – I mentioned that my portfolio has been going pretty well recently:
It is up 35% YT while the S&P500 is down 5.6% for the year.
You can tell from the sudden drop in the green bar when I went heavily into shorting EQR – over half the value of my portfolio is making that bet. That means I’m vulnerable to a takeover announcement or great
macroeconomic housing news, but I also stand to make a healthy percentage if EQR falls. So that green line could dip under that blue line in a day or two.
Here’s the recent performance of EQR:
Intellectually I believe the stock should be under $35, and actually much lower, along with the rest of the sector. However I’m not playing an overly-intellectual game – this is the market, and the market decides where the stock will go. I do see more bad housing news in the future, and believe that the market will react to that by sending the stock price down. I also see the potential for a major flame-out of this stock, but I am not betting on it, though it would be nice.
Jason asked how I am shorting these stocks. I have a US based etrade account that allows me to buy stocks, to short stocks, and, more recently, to buy and sell options. You can open the same sort of account, or use any one of the other online brokers out there. I find it easier to deal with US brokerages than Australia and NZ ones, which have tiny markets, with relatively little transparency on what is going on inside the companies. etrade faced some recent trouble by holding rather too many CDOs, but they have restructured and are now focusing on their excellent trading platform.
Note that there really isn’t a lot of money at stake here – just enough to make it interesting but not critical.
EQR is an interesting short. I would guess that there are other plays in housing that might offer a better risk/reward profile. What’s the thesis behind this particular selection?
well Roy you’ve got me – I have not had the time (or the inclination sadly) to really do my research.
I started following EQR after a friend pointed them out to me, and the more I look the less I like. I’m sure there are more reactive stocks out there, but I hold out hope that EQR could actually fall through the floor – ie right throuh the floor.
But at the end of it all- I could probably do a lot better.
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