New Idea for Founding Members arriving this week.
It's a 2-parter; the idea itself, and something a little extra
Over the next couple of days I will be posting the second idea that will be exclusive to Founding Members only. As I mentioned previously, this will be at least a quarterly feature, and should I manage to attract more Founders subscribers, the number will increase as that happens.
As I state in the “About” section of this Substack, my goal is to primarily serve an institutional subscriber base, which I hope to grow by presenting original and exclusive ideas that these subscribers will hopefully be able to utilize. I plan to limit the number of Founding Member subscribers to 25, at which point that will no longer be an option for new subscribers. That number is still in the single digits, so plenty of room to expand…
When looking for short ideas, institutional investors are mainly concerned with availability and liquidity, and for Founding Members exclusive ideas I am looking for names that are over $1B in market cap and trade north of $20M a day in volume along with my typical screen for stocks with short interest in the sub 5-10% range. Higher short interest numbers may indicate a story is well-known, which sort of defeats the purpose of trying to find novel short ideas.
The idea I will start presenting over the next couple of days has a market cap in the $4B range and trades north of $40M a day on average. It is in the tech space, and as a slight teaser, I think it may have some hidden obsolescence issues in their inventories along with a notable decline in their relationship with a top-tier customer.
There is also a somewhat unusual aspect of one of the company’s shareholders that may present an opportunity as well, and that will be presented as part 2 of the idea.
The last Founding Member idea I presented (which was actually the first) was in July. At the time, the stock was trading for a little over $14 a share, and with something over 55M fully diluted shares outstanding, traded north of $15M a day in volume, and had a market cap of around $800M. Today those shares fetch a little over $6 a share. So if nothing else, a good start to this feature.
You may be asking yourself how I choose which ideas will be for Founding Members vs. those for regular paying subscribers. Other than potentially size and liquidity measures, there really is no difference at how I look at ideas. As I state up front, I am looking to provide my paying subscribers with 10-15 new ideas each year with an indeterminate number of updates and “quick takes.” So far this quarter I have already passed along a couple of new ideas for paying subscribers, so this next idea, being of ample size and liquidity, is simply being allocated to my Founding Members.
As always, I make absolutely zero guarantees about performance, and while I wish there was some way I was able to look into the future and see which ideas performed the best and allocate those to my most valuable subscribers, that’s just never going to happen. So other than possibly size and liquidity considerations, the work I do and the process I stick to will remain the same regardless of which type of paying subscriber you may be.