Friday, January 6, 2012

Shorting LULU.....again

With the overall market starting the first few days of the year in a positive manner, it generally seems like time to get some short positions in place to provide some hedge to the portfolio.   To do that CCI decided to go short Lululemon today at $53.54 after commissions.

CCI discussed some of the fundamental rationale for shorting this stock in this post in October.  Trailing P/E remains at 47.   Being short LULU is not a unique view.  LULU is one of the most heavily shorted stocks in the market.    Earlier this week Goldman Sachs made some positive statements about LULU and the stock has gone straight up about 12%.  CCI is thinking some of that price rise might be a short squeeze caused by this news.  Further, if I was cynical about wall street  (me, cynical about wall street..really) I might think that the street will be nimble enough to take the other side of this situation.  Hence I felt now was a good time to re-enter the short position.  Of course, it is also possible that CCI will become the next victim of the market remaining irrationally optimistic about this stock for an extended period of time.   However,  the overall long bias of the portfolio will probably perform very well if the market continues to move straight up, so this trade can be rationalized as an overall hedge. 

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