The Art of Short Selling (A Marketplace Book)
by Kathryn F. Staley
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Book Summary Information
Author: Kathryn F. StaleyEdition: Hardcover
Audio: English (Unknown); English (Original Language); English (Published)
Published: 1996-12-09
ISBN: 0471146323
Number of pages: 304
Publisher: Wiley
Book Reviews of The Art of Short Selling (A Marketplace Book)
Book Review: Go Long This Book
Summary: 4 Stars
Chapter Six of Kathryn F. Staley's excellent book is titled, "If You Can't Read It, Short It." In it she explains something called iceberg phenomena: "If you find five or six serious questions in financial statements, you can be sure that there are many more you cannot see." She's dead right.
My analysis is to go long this well-written (but very poorly proofread) introduction to the specialized realm of shorting equities. Ms Staley has chosen a style well-suited to the non-expert, rather breezily taking the reader through the balance sheet shenanigans, distribution channel stuffing and other tricks CEOs and corporate directors use to puff up share price and get option grants into the money before taking the next Gulfsteam outta Dodge.
The book is chock-full of entertaining examples of games CEOs and their pliant Boards try to play with shareholders' money. Don't let Ms Staley's light-hearted style fool you. This is very serious business, and she's got years of success in the trenches to bolster her credibility as a writer on this topic.
Reading The Art of Short Selling also reminds even experienced practitioners of financial statement analysis that a 1OK is often an attempt to put a wedding dress on a dog in order to pretty it up for the next financing. I feel obliged to point out that this review is being written during earnings season, and it never ceases to amaze one when supposedly objective analysts are heard on conference calls being cheerleaders for company managements obviously in need of good thrashing.
Kathryn Staley is not unknown to the community of financial analysts. She was profiled as being among the most innovative of analysts in a recent issue of CFA Magazine. To understand the nature of the book she has written, it will be helpful to share two of her quotes from that article:
"...a company's prospectus clearly showed the problems that would ensue with the business plan. It was revelatory for me to find such specific, honest information in the SEC-filed documents about what was going on with a company in both the risk factor section and 'Certain Transactions.'"
"Short sellers think differently from normal brokerage house stock analysts. They work the same numbers but take a different view, a jaundiced view, of growth and the patterns that emerge."
With its focus on the fundamentals of a stock, the business of a company and the manner it which it reports financial results, The Art of Short Selling is not a book on technical analysis (tea-leaf ~ oh, pardon me ~ chart reading), and thus those who have complained that it's not should have their reviews appropriately discounted by potential purchasers.
This is a book for people who want to dig line-by-line through SEC filings to come up with nuggets of knowledge that can be spun into gold ~ if one is willing to risk capital. And, ultimately, it is all about the degree of risk exposure one is willing to assume. Short selling is not for the risk-averse.
Kathryn F. Staley's, The Art of Short Selling, is the best introduction to this iconoclastic field of equities investing. I reiterate, go long this book.
One criticism: this book is hideously proofread and copy-edited. There are dozens of ludicrous spelling errors and inconsistancies. In example, abbreviations aren't uniform throughout the text. There are other errors of this kind. To not make corrections in future editions discounts the future value of the knowledge between the covers. Thus, four stars, not five.
Summary of The Art of Short Selling (A Marketplace Book)
A one-of-a-kind book that shows you how to cash in on the latest investing trend--short selling"The Art of Short Selling is the best description of this difficult technique."--John Train, Train, Thomas, Smith Investment Counsel, and author of The New Money Masters
"Kathryn Staley has done a masterful job explaining the highly specialized art of short selling. Her approach to telling the true stories of famous investment 'scams' will keep the reader spellbound, while teaching the investor many crucial lessons."--David W. Tice, Portfolio Manager, Prudent Bear Fund
"Selling short is still a misunderstood discipline, but even the most raging bull needs to know this valuable technique to master the ever-changing markets."--Jim Rogers, author, Investment Biker
On the investment playing field, there is perhaps no game more exciting than short selling. With the right moves, it can yield high returns; one misstep, however, can have disastrous consequences. Despite the risk, a growing number of players are anteing up, sparked in part by success stories such as that of George Soros and the billions he netted by short selling the British pound. In The Art of Short Selling, Kathryn Staley, an expert in the field, examines the essentials of this important investment vehicle, providing a comprehensive game plan with which you can effectively play--and win--the short selling game.
Whether used as a means of hedging bets, decreasing the volatility of total returns, or improving returns, short selling must be handled with care--and with the right know-how. As Staley points out, "Short selling is not for the faint of heart. If a stock moves against the position holder, the effect on a portfolio and net worth can be devastating. Investors need to understand the impact on their accounts as well as the consequences of getting bought in before they indulge in short selling." The Art of Short Selling guides you--clearly and concisely--through the ins and outs of this high-risk, high-stakes game.
The first--and most important--move in selling short is to identify flaws in a business before its share prices drop. To help you tackle this key step, Staley shows you how to evaluate company financial statements and balance sheets, make sense of return ratios, detect inconsistencies in inventory, and analyze the statement of cash flows. Through real-world examples that illustrate the shorting of bubble, high multiple growth, and theme stocks, you'll proceed step by step through the complete process and learn to carry out all the essentials for a successful short sell, including quantifying the risk factor and orchestrating correct timing, as well as implementing advanced valuation techniques to execute the sell/buy.
Packed with landmark, cutting-edge examples, up-to-the-minute guidelines, and pertinent regulations, The Art of Short Selling is a timely and comprehensive reference that arms you with the necessary tools to make a prepared and confident entrance onto the short selling playing field.
To "sell short" on Wall Street, an investor finds overpriced stocks and then deals them before actually buying them. Regularly falling in and out of favor, the discipline remains one of the financial market's highest-risks but most profitable practices. The Art of Short Selling by Kathryn Staley, an expert in the field, uses examples and instructions to show how it can be done successfully--while cautioning that it "is not for the faint of heart."
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