Saturday, October 31, 2009

Short selling ideas

A few of you have already seen the demo version of this site, but the live version of it is up now: This site features an automated calculator and a screener based on the Altman models. With the calculator, all you need to do is enter a stock symbol, and the calculator will instantly give you that company's Altman Z-score, or Altman Z"-score, if it's a non-manufacturing company.

The screener runs the Altman Z-Score model on all of the manufacturing stocks in the site's database, and the Altman Z"-Score on all the non-manufacturing stocks. You can pick a minimum share price and then see a list of the 50 most distressed stocks at or above that share price, out of the universe of roughly 3,000 stocks in the site's database. You'll find a couple of the short positions I've mentioned previously on this blog among the 50 most distressed stocks at or above $9 per share.

If, like me, you think it's prudent to include some short positions in your portfolio, perhaps you will agree that a list of stocks that the Altman models predict are headed for bankruptcy might be worth considering as potential candidates for short selling (or buying puts on them, if the particular stocks have options).

The site also has a message board system with a couple of unique features. The first is that, unlike other stock message boards, there will be no bias against skeptical or bearish comments. If you've ever posted one of those on a typical message board, you probably noticed that it quickly got deleted. That makes it tough to find a balanced discussion about any stocks.

The other unique feature is the premium ranking system. Premium members will have the authority to rank comments on a scale from one to five stars. Comments that have an average rank of less than two stars after several votes will be deleted, and the highest-ranked comments will move to the top. Although non-paying registered users and paying premium members will both be able to post on the message boards, the site limits the ranking authority to premium members to discourage anyone from creating multiple accounts in order to manipulate the ranking system (which is pretty common, unfortunately, on Yahoo's message boards).

Premium members will also have the opportunity to become affiliates, and get paid to refer other premium members to the site. When you become an affiliate, you'll get a unique bit of HTML code for an affiliate badge that you can copy and paste onto your site. When you do, it will look like this:

When visitors click on your affiliate badge, they'll go to a special version of the Shortscreen sign-up page where they will get a 5% discount off of the regular membership rate, and your affiliate account will be credited with the referral.

The image above was one of the later preliminary sketches by my logo designer. At that point we were refining the steepness of the hump of the bear's withers. I wanted it to be steep to connote aggression, but when it got too steep it looked too wolf-like.