ShareThis Page

Sell short and win a contest

John Dorfman
| Tuesday, Sept. 18, 2012, 12:01 a.m.

I hope never to see another stock market decline like the one that pulverized investors from October 2007 to March 2009. But as long as there are markets, there will be declines.

Short selling is a technique for profiting from declines. Short sellers borrow stock and immediately sell it, hoping it will drop in price. After a time, they “cover” by buying shares to replace the borrowed ones. If the stock falls during that interval, they make a profit. The idea is to “buy low and sell high,” but in reverse order. You attempt to sell high first and buy low afterward.

Many people feel that short selling is un-American or at least vaguely sleazy. I do not agree, although I have known a few sleazy short sellers over the years. Many short sellers are thoughtful investors who do thorough research.

In 1998-99, I started a contest in this column, called the Short Sellers Don't Have Horns annual short selling contest. I am reviving that contest and invite anyone to join.

I compiled the contest results each September for eight years, from 1999 through 2006. But the ninth contest, which was supposed to conclude in September 2007, ran into a problem. In February 2007, I temporarily retired as a columnist. I failed to tabulate the 2006-2007 results.

But now it can be told. The winner of the 2006-2007 contest was John DiSerio, a private investor from Montreal. His pick, Delta Airlines (DALRQ), was in bankruptcy when he selected it and was trading for $1.37 a share.

In some cases, it is possible to borrow a stock of a bankrupt company and short it. DiSerio said that he has done so with several companies. In the case of Delta, I don't know whether he was able to short it in real life. But on paper, his short sale declined 98.7 percent as stockholders emerged from bankruptcy proceedings with only 1.8 cents per share.

Second place in the delayed contest went to David Gay, a marketing executive from Alamo Heights, Texas. His pick, Manchester Inc., dropped about 85 percent.

Roger Boyd, a broker from Toms River, N.J., took third place. His short sale, Zingo Inc., also fell nearly 85 percent.

Christian Olesen, an analyst and trader in Greenwich, Conn., who had won the 2005-2006 contest, didn't officially enter the 2006-2007 one. But in an interview, he too had indicated an interest in shorting Delta Air Lines.

Of the 47 contestants, 25 managed to pick a stock that declined. That is very good, considering that the Standard & Poor's 500 Index rose 13 percent during the contest period, Sept. 29, 2006, through Sept. 14, 2007. The median score was a gain of 10 percent, meaning that the median stock pick declined 10 percent. At least a dozen of the contestants' picks eventually went bankrupt when the economy collapsed in 2008-2009.

Here's a roster of the past winners and the stocks they shorted. The years shown are the year each contest ended.

• 1999 – Tie between Greg Margolis and Glenn Skreppen (LHS Group).

• 2000 – Jeffrey Newman (EToys Inc.)

• 2001 – Henry Littig (

• 2002 – Anson Beard (Genesis Intermedia Inc.).

• 2003 – Andrew Lauman (Allegiance Telecom).

• 2004 – Lionel Archille (Covad Communiations Group Inc.).

• 2005 — Jonathan Kniss (LFG International Inc.).

• 2006 – Christian Olesen (UAL).

Entries are open for the 2012-2013 Short Sellers Don't Have Horns contest. To enter, email me at Entries must be emailed by 4 p.m. on Friday, Sept. 28.

Each entry must include the name and stock symbol of a stock, along with the reason you expect it to decline in the next 12 months. Include your occupation and your phone number. Entries that don't include all the information may be disqualified.

The stock must be based in the United States and have a market value of at least $100 million as of Sept. 28, 2012. The contest will be judged by the stock's price change from the market's close on that date through the close on Sept. 10, 2013.

In real life, only professional investors and experienced amateurs should try short selling. That's because in a short sale, it's possible to lose more money than you initially invest, which is not the case with a conventional investment. Also, the maximum gain on a short sale is 100 percent, while gains on ordinary “long” positions are theoretically unlimited.

But don't let that stop you from entering the contest. The winner will receive a CD featuring the music of singer and pianist Bobby Short.

John Dorfman is chairman of Thunderstorm Capital LLC in Boston. He can be reached at or 617-542-8888.

TribLIVE commenting policy

You are solely responsible for your comments and by using you agree to our Terms of Service.

We moderate comments. Our goal is to provide substantive commentary for a general readership. By screening submissions, we provide a space where readers can share intelligent and informed commentary that enhances the quality of our news and information.

While most comments will be posted if they are on-topic and not abusive, moderating decisions are subjective. We will make them as carefully and consistently as we can. Because of the volume of reader comments, we cannot review individual moderation decisions with readers.

We value thoughtful comments representing a range of views that make their point quickly and politely. We make an effort to protect discussions from repeated comments either by the same reader or different readers

We follow the same standards for taste as the daily newspaper. A few things we won't tolerate: personal attacks, obscenity, vulgarity, profanity (including expletives and letters followed by dashes), commercial promotion, impersonations, incoherence, proselytizing and SHOUTING. Don't include URLs to Web sites.

We do not edit comments. They are either approved or deleted. We reserve the right to edit a comment that is quoted or excerpted in an article. In this case, we may fix spelling and punctuation.

We welcome strong opinions and criticism of our work, but we don't want comments to become bogged down with discussions of our policies and we will moderate accordingly.

We appreciate it when readers and people quoted in articles or blog posts point out errors of fact or emphasis and will investigate all assertions. But these suggestions should be sent via e-mail. To avoid distracting other readers, we won't publish comments that suggest a correction. Instead, corrections will be made in a blog post or in an article.