Articles on https://seekingalpha.com/. Many authors there give free ideas/tips as advertisement for their paid subscription services. The comments section of articles often have useful discussions.
Follow the quarterly reports of small actively managed funds (or the portfolio/holdings reports on Morningstar, which show fund portfolio changes) to get stock ideas.
Follow reputable activist short-sellers on Twitter. (They find companies that commit fraud, like Luckin Coffee or Wirecard, and report on them after shorting their stock.)
Look for Robinhood bubble stocks (famous examples being Nikola, Hertz and Kodak) and short them as they start to burst. (But watch out for Hard To Borrow fees, and early assignment risk if you’re shorting call options.)
Arbitrage between warrants and call options for the same stock. Robinhood users can’t buy warrants but can buy call options, so call options can be way overpriced relative to warrants. (I’m not sure why hedge funds haven’t arbitraged away the mispricings already, but maybe it’s because options markets are small/illiquid enough that it’s hard to make enough money to be worthwhile for them.)
Look for sectors that crash more than they should in a market downturn, due to correlated forced deleveraging, and load up on them when that happens. The energy midstream/MLP sector is a good recent example, because a lot of those stocks were held in closed end funds in part for tax reasons, those funds all tend to use leverage, and because they have a maximum leverage ratio that they’re not allowed to exceed, they were forced to deleverage during the March crash, which caused more price drops and more deleveraging, and so on.
Note on 5: Before you try this, make sure you understand what you’re getting into and the risks involved. (There are rarely completely riskless arbitrage opportunities, and this isn’t one of them.)
Stock borrowing cost might be the biggest open secret that few investors know about. Before buying or shorting any individual stock, check its borrowing cost and “utilization ratio” (how much available stock to borrow have already been borrowed for short selling) using Interactive Broker’s Trader Workstation. If borrowing cost is high and utilization ratio isn’t very low (not sure why that happens sometimes) that means some people are willing to pay a high cost per day to hold a short position in the stock, which means it very likely will tank in the near future. But if utilization ratio is very high, near 100%, that means no new short selling can take place so the stock can easily zoom up more due to lack of short selling pressure and potential for short squeeze, before finally tanking.
If you do decide you want to bet against the short sellers and buy the stock anyway, at least hold the position at a broker that offers a Fully Paid Lending Program, so you can capture part of the borrowing cost that short sellers pay.
Where do you go to identify Robinhood bubbles? (Maybe other than “lurk r/wallstreetbets and inverse whatever they’re hyping”).
I guess this question is really a general question about where you go for information about the market, in a general sense. Is it just reading a lot of “market news” type sites?
I’m reluctant to give out specific names because I’m still doing “due diligence” on them myself. But generally, try to find activist short-sellers who have a good track record in the past, and read/listen to some of their interviews/reports/articles to see how much sense they make.
Where do you go to identify Robinhood bubbles?
I was using Robintrack.net but it seems that Robinhood has stopped providing the underlying data. So now I’ve set up a stock screener to look for big recent gains, and then check whether the stock has any recent news to justify the rally, and check places like SeekingAlpha, Reddit, and StockTwits to see what people are saying about it. Also just follow general market news because really extreme cases like Hertz will be reported.
I guess this question is really a general question about where you go for information about the market, in a general sense.
Podcasts seem to be a good source, especially ones that interview a variety of guests so I can get diverse perspectives without seeking them out myself. I currently follow “Real Vision Daily”, “Macro Voices”, and “What Goes Up”.
Possible places to look for alpha:
Articles on https://seekingalpha.com/. Many authors there give free ideas/tips as advertisement for their paid subscription services. The comments section of articles often have useful discussions.
Follow the quarterly reports of small actively managed funds (or the portfolio/holdings reports on Morningstar, which show fund portfolio changes) to get stock ideas.
Follow reputable activist short-sellers on Twitter. (They find companies that commit fraud, like Luckin Coffee or Wirecard, and report on them after shorting their stock.)
Look for Robinhood bubble stocks (famous examples being Nikola, Hertz and Kodak) and short them as they start to burst. (But watch out for Hard To Borrow fees, and early assignment risk if you’re shorting call options.)
Arbitrage between warrants and call options for the same stock. Robinhood users can’t buy warrants but can buy call options, so call options can be way overpriced relative to warrants. (I’m not sure why hedge funds haven’t arbitraged away the mispricings already, but maybe it’s because options markets are small/illiquid enough that it’s hard to make enough money to be worthwhile for them.)
Look for sectors that crash more than they should in a market downturn, due to correlated forced deleveraging, and load up on them when that happens. The energy midstream/MLP sector is a good recent example, because a lot of those stocks were held in closed end funds in part for tax reasons, those funds all tend to use leverage, and because they have a maximum leverage ratio that they’re not allowed to exceed, they were forced to deleverage during the March crash, which caused more price drops and more deleveraging, and so on.
Note on 5: Before you try this, make sure you understand what you’re getting into and the risks involved. (There are rarely completely riskless arbitrage opportunities, and this isn’t one of them.)
Stock borrowing cost might be the biggest open secret that few investors know about. Before buying or shorting any individual stock, check its borrowing cost and “utilization ratio” (how much available stock to borrow have already been borrowed for short selling) using Interactive Broker’s Trader Workstation. If borrowing cost is high and utilization ratio isn’t very low (not sure why that happens sometimes) that means some people are willing to pay a high cost per day to hold a short position in the stock, which means it very likely will tank in the near future. But if utilization ratio is very high, near 100%, that means no new short selling can take place so the stock can easily zoom up more due to lack of short selling pressure and potential for short squeeze, before finally tanking.
If you do decide you want to bet against the short sellers and buy the stock anyway, at least hold the position at a broker that offers a Fully Paid Lending Program, so you can capture part of the borrowing cost that short sellers pay.
What are some reputable activist short-sellers?
Where do you go to identify Robinhood bubbles? (Maybe other than “lurk r/wallstreetbets and inverse whatever they’re hyping”).
I guess this question is really a general question about where you go for information about the market, in a general sense. Is it just reading a lot of “market news” type sites?
I’m reluctant to give out specific names because I’m still doing “due diligence” on them myself. But generally, try to find activist short-sellers who have a good track record in the past, and read/listen to some of their interviews/reports/articles to see how much sense they make.
I was using Robintrack.net but it seems that Robinhood has stopped providing the underlying data. So now I’ve set up a stock screener to look for big recent gains, and then check whether the stock has any recent news to justify the rally, and check places like SeekingAlpha, Reddit, and StockTwits to see what people are saying about it. Also just follow general market news because really extreme cases like Hertz will be reported.
Podcasts seem to be a good source, especially ones that interview a variety of guests so I can get diverse perspectives without seeking them out myself. I currently follow “Real Vision Daily”, “Macro Voices”, and “What Goes Up”.