Founding Member Ideas
New idea arriving later today
Sometime later today my Founding Members should be receiving their third exclusive idea to their inboxes.
As a reminder, the current plan is to provide that group with 4-6 exclusive ideas annually, with that number scaling higher as the number of Founding Member subscribers increases. I am also setting up another Substack that will solely be used to service that group.
I plan to limit the size of that group to 25 institutions, but I am still quite a bit away from having to tap on the brakes, so feel free to reach out or hit the bid if you so desire :-)
BTW, for those institutions who would be interested in utilizing soft dollars rather than a corporate credit card, I do have relationships set up with both Instinet and Liquidnet currently, and would be happy to establish more with other vendors should there be some interest. I am also able to send out scheduled invoices as well.
Anyways, the reason to limit the distribution size, of course, ranges from less competition to borrow a name should you desire to do so, to limiting the amount of monkey-business that tends to transpire in many widely trafficked names (hello, HIMS). While having a big megaphone can certainly have its uses at times, that has never particularly been something I found to be of interest.
The Founding Members tier is priced for institutional investors that are actively looking for Short Ideas to balance out the long bias in their portfolios. As I have mentioned elsewhere, I don’t believe regular investors should be actively shorting individual stocks. It’s fine for everybody to understand the other side of a story and get an alternate perspective and perhaps use that information to adjust their personal position sizes, but actually shorting stocks is something better left to the professional investor.
With that in mind, all of the ideas I will be presenting to this group will have certain size and liquidity targets placed on them:
Market caps greater than $1B (I am shooting for higher).
Stock price over $10. No cheapie stocks.
Daily average trading volumes over $10M/day.
Short interest under 10% of the company’s market cap. I know some folks prefer to use float as the guide, but I have always been a fan of market cap.
I hope to diversify idea flow over industries, but that is dependent on finding good ideas. I will never publish something simply for the sake of publishing something.
Easy borrowing available and rate under 5% according to the folks over at
https://www.iborrowdesk.com/ or wherever I may browse. Your prime broker may be different, and it usually will be, but I need some sort of measure.
In short, I want these ideas to be fairly easy for institutions to participate should they have a desire to do so. I am unlikely to ever pick on something as big or as liquid as an NVDA or MSFT where pretty much any hedge fund in the world can put on a full position in the matter of a few seconds, but I do recognize that those things matter as funds scale up in size.
To recap and provide a bit of a teaser, the 2 ideas I have highlighted so far and the one I will highlight later on today have had the following features and have performed like this:
Idea #1 - I started off a bit small in the tech sector. The first idea was only about $750M in market cap at the time of writing, though it was trading over $10M per day in volume. The short interest at the time was around 3.7M shares with something over 55M fully diluted shares outstanding, and short interest later peaked at around 7M shares.
Performance? My timing proved fortuitous, as within 3 months the $14 shares were cut in half. They would later stage a nice rally at the end of the year, surpassing the price at my original report in early January, though they have subsequently retreated and shares are back to around $8.
Compared to any index you choose, this idea has worked out well.
Idea #2 - My second idea was a $4.5B play in the tech sector as well. Of the 22.5M shares outstanding, maybe 1.5M were short at the time, and the number is actually even lower today.
This stock didn’t behave nearly as well, with the shares rising around 40% in the months following publication on the back of decent results and what was called strong guidance which likely spooked some otherwise skeptical investors.
However, things changed earlier this year as the DeepSeekAI crash took a toll on the shares, which was soon followed by an in-line earnings report and lackluster guidance. The first trigger knocked 20% off the shares, while the second event lopped an additional 20% off the stock. The stock has been weak ever since, and shares are now down something over 11% since my first mention (while the NASDAQ is up around 5%). Overall, not horrible performance so far, but with a level of volatility that drives the point home for why I don’t believe shorting stocks is suitable for individual investors.
Idea #3 - I actually had a quasi-insurance-related stock half-written up, but got spooked by this one data point, so I decided to go with something else (there may be an idea $4 coming soon after they announce earnings).
Tomorrow’s idea will once again be in the tech sector, and is a $10B+ company trading over $100M of stock each day. Short interest is under 3% of the total outstanding shares, and shares are readily borrowable in size.
Finally, for anyone interested in learning more about me, my background, and some thoughts on the Short Ideas process, please feel free to visit my “About” page for more of a lengthy discussion.
https://martinsvanda.substack.com/about
I appreciate your support.