Champion Short Seller Targets Bitcoin-Affinity Software Company

Laurent Condon, a professional trader in France, won my Short Sellers Don’t Have Horns short seller competition – his second triumph in the annual competition.

Condon previously won the competition in 2017-2018, and finished third the following year. He has also excelled in some of my other competitions.

In addition to the short-seller contest, I run a traditional stock-picking contest called the Dorfman’s Three-Stock Derby, and an economic forecasting contest called the Derby of Economic Forecasting Talent, or DEFT.

Condon has finished first and third in the traditional stock picking competition, so he has won honors in five of my competitions – the best showing of any.

So far he has not won any prizes in the economic forecasting competition “As you may know from my ridiculous results in your DEFT competitions, I have no idea about macroeconomics,” he wrote to me a few days ago.

Short sellers bet on selected stocks to go down. They borrow shares and sell them. At some point they have to buy it back, but if the price drops in the meantime, they make a profit. Think of it as buying low and selling high, in reverse order.

Outstanding year

The participants in my last shorting contest did remarkably well: All 16 participants picked a stock that went down. It is a feat never before achieved in the competition’s 19-year history.

The median return was approximately 56%, the second largest in the competition’s history. The largest was 80% in September 2000-2001, when a violent bear market raged.

The last competition ran from 30 September 2021 to 9 September 2022. A new one will start soon. You are invited to play, whether you sell shorts in real life or not.

First place

Condon achieved a 91% return on his short sale of Camber Energy (CEI)which was remarkable considering most energy stocks did well over the past year.

He said a year ago that Camber had “no earnings, reduced sales, (and) poor management”. The stock had spiked, based on a press report regarding a “patented carbon capture system.”

Condon felt there was less to that news than met the eye. “It seemed to me that management was more concerned with issuing press releases … than running the business,” he said.

Camber also showed what Condon called “explosive stock issuance.” When a company issues new shares, it usually dilutes the value of old ones.

Now one of his favorite shorts Micro strategyMSTR
. “Officially, it’s a software company,” he says. “But in fact it is a very risky financial instrument, bitcoins on steroids, i.e. bitcoins bought with debt. We’re talking billions in debt here.”

Second place

David Heilman, a retired attorney in Las Vegas, Nevada, took second place with an 88% gain on a short sale of Carvana (CNVA). Carvana sells used cars online, and delivers some of them from buildings that resemble giant vending machines. The debt is more than 15 times the company’s net worth.

Carvana was around $322 when Heilman entered the contest, and is now around $33. Heilman believes the stock market will be “choppy and range-bound” over the next 12 months.

Third place

Derek Galbraith of Westmount, Quebec, Canada was third with a short of 79% Beyond MeatBIND
. He is president of Lanart Rug. “Beyond Meat valued at a ridiculous 15 times sales is an easy pick,” he wrote a year ago. He says the company is “nothing special, just a struggling vegetarian meat supplier.”

Galbraith believes the market will be in a “holding pattern” for two or three months as investors seek clarity on inflation. But he expects 2023 to be better. “It’s hard to see a bad recession when unemployment is historically low,” he says.

You can play

You are most welcome to participate in my 20^th annual short sellers don’t have Horns short seller competition. Pick a stock that you expect to fall a lot from September 30 this year to September 8, 2023.

Entries must contain your name, hometown, telephone number, e-mail and the name of the stock you think is tough. It must be a US-based stock. You don’t have to provide a reason, but I appreciate it if you do.

You are not required to sell the stock short with real money, but it is fine if you do.

First place awards a prize, chosen at your discretion. Past prizes have included a shortcake and an album by pianist Bobby Short. Second and third place does not bring a prize, but honor.

Send contributions to [email protected] by midnight on September 30. If you prefer old-fashioned mail, write to John Dorfman, Dorfman Value Investments, Suite 1900, 101 Federal Street, Boston MA 02110.

Disclosure: A hedge fund I manage (and invest in) is briefly Beyond Meat.