Perfect Shorts

Perfect Shorts produces and publishes alerts on the shares of companies that are identified that have a high probability of going to zero. The alerts are utilized to trade put options on the underlying shares of a perfect short candidate. The alerts are sent directly to an online broker who executes the orders for the purchase of put options for the behalf of the subscriber.  

A key characteristic of a perfect short is that its shares have buy recommendations by one or more Wall Street analysts.  Another characteristic for a perfect short is its being diagnosed with one or more of the following:

  • The EPS Syndrome
  • Cashless earnings
  • Severe negative cash flow

The “perfect short” designation began to evolve in 2002 when BullsNBear’s Director of Research, Michael Markowski discovered operational-cashflow per share (OPS) anomalies after he conducted a post-mortem on bankrupt Enron’s Financial Statements.  Further back testing led Mr. Markowski to discover more than 100 public companies prior to Enron that had gone bankrupt after having the exact same OPS anomaly.  Markowski also discovered Suprema Specialties, which became the poster child for the anomaly. Within weeks Suprema had completed a $50 million secondary financing and had reported record EPS for its 15th consecutive quarter the company had filed for bankruptcy.   

Mr. Markowski named the anomaly “The EPS Syndrome” and developed an algorithm to diagnose and monitor all public companies for the anomaly.  See “About ‘The EPS Syndrome’ and how it was discovered”.  Based on his findings and the other cash flow metrics including free cash flow per share (FPS) and algorithms that he subsequently developed to screen for the best and worst companies Mr. Markowski founded StockDiagnostics.com and “The OPS Newsletter”.  The EPS Syndrome algorithm enabled Mr. Markowski to successfully predict the demises of numerous seemingly healthy companies which at the time of their diagnosis were highly recommended by Wall Street analysts.  The video below entitled “The EPS Syndrome; Lehman and Merrill Lynch” explains OPS and The EPS syndrome.

 

During the 15 years since he discovered the anomaly, Mr. Markowski has conducted ongoing research on the economic and market conditions for which the anomaly surfaces.  Companies tend to become Perfect Shorts during a secular bear market for two reasons:

  • Have weak cash flow business models which were subsidized during a bull market.
  • More difficult to raise capital during a bear market.

The table below lists Mr. Markowski’s media verifiable perfect shorts for which Wall Street analysts had buy recommendations.  Information about secular bull and bear markets available under the Secular Bull & Bear Markets research tab.

 

Media Verified Perfect Shorts 2002-2012

Company Year of Impact Result Publication
Adelphi Communications 2002 Bankruptcy Forbes.com
The Fleming Companies 2003 Bankruptcy Forbes.com
MCSI 2003 Bankruptcy The OPS Newsletter
Astropower 2003 Bankruptcy The OPS Newsletter
Cray 2004 42% decline SmartMoney.com
Emerge Interactive 2007 Bankruptcy SmartMoney.com
Friedman’s 2008 Bankruptcy WallStreetJournal.com
Lehman Brothers 2008 Bankruptcy Equities Magazine
Bear Stearns* 2008 92% decline Equities Magazine
Merrill Lynch* 2008 63% decline Equities Magazine
Morgan Stanley* 2008 80% decline Equities Magazine
Goldman Sachs* 2008 67% decline Equities Magazine
Nortel Networks 2009 Bankruptcy SmartMoney.com
Sun Power 2012 92% decline Equities Magazine
Titan Machinery 2016 70% decline equities.com
Conn’s 2016 91% decline equities.com

*rescued from 2008 crash

 

The cash flow analytics and tools that were developed by Mr. Markowski enabled him to become one of Equities Magazine’s most read authors.  It’s because Mr. Markowski wrote with CONVICTION.  His September 2007 Equities Magazine article entitled “Have Wall Street’s Brokers Been Pigging Out?” is a good example.  The article was about all of Wall Street’s largest five brokers including Lehman Brothers, Bear Stearns, Merrill Lynch, Morgan Stanley and Goldman Sachs having severe negative cash flow.  In the article he stated “I believe that there will be a day of reckoning.  It will be sooner rather than later and that day will be ugly for the five large brokers”.  One year later Lehman had declared bankruptcy and the four other brokers would have gone out of business had they not been rescued.  See EPS/FPS/OPS charts below for brokers and other select companies in Media Verified Perfect Shorts in table above.   Apple Inc., chart inserted for frame of reference since it has been a perfect long.

Perfect Short Research is the ideal short research product for an investor to capitalize from during a secular bear market.  The achilles’ heel for a company that meets the qualifications of a perfect short is its negative cash flow.  Thus, a perfect Short is defenseless during a secular bear market since raising additional capital becomes increasingly difficult.  This enables traders of put and call options to have the level of CONVICTION that is needed to stay in the trade and to also parlay his or her profit.  For example, while Mr. Markowski was the author of The OPS Newsletter, a subscriber was able to deploy a strategy that enabled him to make a 20X multiple on his investment in less than 24 months.    

Notice:

Subscriptions to Perfect Shorts Research are not yet available.  Our research is exclusively to be utilized during a secular bear market.  We will not commence to make perfect shorts recommendations to subscribers until the stock market’s technical indicators confirm that the new secular bear market is underway.  You will receive an alert when the secular bear market has been confirmed and subscriptions to Perfect Shorts Research become available.  Finally, the number of Perfect Shorts Research subscriptions that will be available will be limited.  Subscriptions will be allocated based on waiting list seniority.  Click here to sign up for Perfect Shorts.

 

For access to the research page for Perfect Shorts go to Negative Cash Flow Research page.