Professional French trader wins shorting contest for 2nd time

LAURENT Condon, a professional trader in France, won my “Short Sellers Don’t Have Horns” contest — his second triumph in the annual competition.

Condon previously won the contest in 2017-2018, and finished third the following year.

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

Outstanding year

Contestants in my latest shorting competition did remarkably well: All 16 entrants picked a stock that declined.

The median return was about 56 percent, the second largest in contest history. The largest was 80 percent in September 2000-2001, when a fierce bear market was raging.

The latest contest ran from Sept. 30, 2021 through Sept. 9, 2022. A new one will start soon. You are invited to play, whether you sell stocks short in real life or not.

First place

Condon scored a 91 percent return on his short sale of Camber Energy Inc., which was remarkable considering that most energy stocks did well in the past year.

He said a year ago Camber had “no earnings, decreasing sales (and) bad management.” The stock had spurted, based on a news release regarding a “patented carbon-capture system.”

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

Now, one of his favorite shorts is Microstrategy Inc. (MSTR). “Officially, that’s a software company,” he says. “But actually it’s a very risky financial instrument, bitcoins on steroids, i.e. bitcoins bought with debts. We are talking multibillion debt here.”

Second place

David Heilman, a retired attorney in Las Vegas, seized second place with an 88 percent gain on a short sale of Carvana Co. (CNVA). Its debt is more than 15 times the company’s net worth.

Carvana was at about $322 when Heilman entered the contest, and now is at about $33. Heilman thinks the stock market will be “choppy and range bound” in the next 12 months.

Third place

Lanart Rug President Derek Galbraith of Westmount, Quebec, took third with a 79 percent gain shorting Beyond Meat Inc. (BYND).

“Beyond Meat valued at a ridiculous 15 times sales is an easy pick,” he wrote a year ago.

Galbraith thinks the market will be in a “holding pattern” for two or three months while investors seek clarity about inflation. But he expects 2023 to be better.

You can play

Pick a stock that you expect will decline a lot from Sept. 30 of this year through Sept. 8, 2023.

Entries must include your name, home city, phone number, email and the name of the stock you think will fizzle. It must be a U.s.-based stock. You aren’t required to give your reasons, but I appreciate it if you do.

You are not required to sell short the stock with real money, but it’s OK if you do.

First place carries a prize, chosen at my discretion. Past prizes have included a shortcake and an album by pianist Bobby Short. Second and third place carry no prize but glory.

Send entries to jdorfman@dorfmanvalue.com by midnight Sept. 30 or write to John Dorfman, Dorfman Value Investments, Suite 1900, 101 Federal St., Boston MA 02110.