Tag Archives: TSLA

tesla, fitbit, and what happens when wall street forgets a fad is a fad

As I highlight in the introduction of my book Dead Companies Walking, retired New York money manager David Rocker once wrote that there are three types of shorts:  fads, frauds and failures. I generally focus on the latter of the three by seeking out and shorting troubled companies that could soon go broke. Shorting fads, on the other hand, is tricky. Timing is everything, and predicting exactly when a fad fizzles out is almost impossible. Remember “Pogs,” those weird little toy discs that kids briefly went nuts for a while back? It seems unbelievable in retrospect, but two Pog-related companies came public during that mania. Both went bankrupt soon after the craze subsided, but if you’d shorted either of them beforehand, you would have needed some serious intestinal fortitude to stay in the position.

The trickiest fad businesses to short are the ones that grow so popular in such a short time, even seasoned investors become convinced they will turn evergreen. This is particularly true for products that are popular among financial workers and the broader investor class. After all, if the folks buying, selling and analyzing stocks love a company’s products, they’re more likely to overestimate its value and its longevity. As I write in my book, an analyst at a prestigious brokerage once swore to me that there would soon be ten times as many rollerbladers as bicyclists. Before I hung up the phone and shorted the stock of the second largest inline-skate maker at the time, she happily informed me that she and many of her colleagues were avid rollerbladers.

The two biggest “stealth fad” stocks in today’s market could very well be Fitbit (FIT) and Tesla (TSLA). Neither is likely to go the way of Pogs or rollerblades, at least anytime soon. But, like rollerblades, they’ve both benefited from their excessive popularity among the very people buying and analyzing their stocks.

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the real march madness: our terrible system of higher education

[note: a slightly different version of this post originally appeared on my Yahoo! Finance contributor page]

I’m a sports fan, but I don’t plan on watching the Final Four this weekend. Sure, the players are inspiring and the games are usually exciting and dramatic. I just can’t bring myself to tune in to a bunch of unpaid employees generating billions for one of the most corrupt rackets in the world, the NCAA. But–as regular readers of this blog know all too well by now–my distaste for so-called amateur athletics pales next to the utter disgust I feel for our broader system of higher education.

Talk about an industry desperately in need of disruption.

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