Two weeks ago, I flew to my old stomping grounds in Houston and visited seven energy companies in three days. The mood around town and in corporate offices was far more upbeat than my last few trips down there, and not just because the Rockets were in the midst of pulling off one of the biggest comebacks in NBA playoffs history.
Despite what you might have heard, the oil business is rebounding.
Uber-mania just keeps growing. Last week, we learned its valuation has risen to an unbelievable $50 billion.
I know I sound like a voice in the wilderness but FIFTY BILLION!? Seriously? That is absolutely insane. Hell, it was insane $40 billion dollars ago. I don’t even know what to call it now. Uber will never, and I mean never justify that number.
With his billion dollar battle royale against Herbalife entering its fourth year, Bill Ackman is starting to sound a bit punchy. Last week, during an Interview for Bloomberg TV, he likened short-selling to “brain damage” and declared “there are easier ways to make money.”
All I can say is: I feel your pain, Bill!
I don’t bet against powerful corporations with billions in market cap. By and large, the companies I short are beaten down and headed for bankruptcy. But the stocks of sickly firms can stay just as stubbornly high as Herbalife’s has, and they often spike higher for brief spurts even as their underlying businesses erode. Living through these rallies might not cause brain damage, but it’s definitely a major headache.
As the manager of my hedge fund, I’ve traveled around the country and met with thousands of CEOs, CFOs and other top executives in their corporate offices. Name any business complex or office park west of the Mississippi and there’s a good chance I’ve been there at some point over the last 30 years. Often, if I’m invested in a company or I’m particularly intrigued by its business, I’ll stop through to speak with its managers multiple times.
Most of these interviews are cordial but brief and to the point. Some, however, have been a little wacky. I list my top 5 most outrageous company visits in my latest piece for CNBC.com. Click here if you’d like to read it.
All five visits are also featured in Dead Companies Walking, but one of the weirdest business trips I’ve ever taken didn’t make it into the book or the CNBC article, so I figured I’d offer it here as an outtake.
I’m kicking myself for not following my instincts and shorting Yelp (YELP) before it announced utterly rancid earnings last Thursday. For years, the only thing that has mystified me more than Yelp’s business model has been its enduring popularity with Wall Street. As I type, I’m looking at a pile of recent analyst reports with absurd price targets for the company. I like to save these kinds of laughably optimistic reports. It’s a hobby of mine. I’ve still got a glowing buy recommendation for Enron dated only days before the energy behemoth imploded.
For all my doubts about Yelp and other social media stocks, there’s a good reason I have not shorted any of them up to now. It’s just too risky to bet against companies in the midst of a secular mania–and make no mistake, that is exactly what has lifted Yelp, Twitter, LinkedIn and their ilk to stupidly large valuations that they will almost certainly never live up to.