It seems like short selling in the face of the bull market continues to confound even seasoned short-sellers. Einhorn's GMCR jumped over 74% in the last part of 2012, while HLF is now higher than Ackman's announcement.
In this context, and taking the premise that a 90s-style bull market is in the making, is it time for funds to drop the short in long-short equity investing? Given the pent-up demand that has finally started shifting towards equities (note the large inflows to equity mutual funds, the first time in years), will idiosyncratic bear theses simply be overrun by investors chasing the next best thing?
I point out the easy finds are not so easy now:
-Negative fcf (a la GMCR), run over by revenue gains
-Insider selling in the form of unusual secondary offerings (NOW, SPLK, PANW), only get more expensive and have acquisition risk.
-China frauds (FMCN, QIHU) - these are very heterogeneous, but governments and indeed officers have wised up and simply obfuscate harder.
In addition, many of the shorts left are either very crowded or are in fundamentally growing industries. (e.g. Zillow may be a boiler-room selling operation, but still has a housing website that can catch on).
Perhaps one remaining area are the industry declining areas (HPQ), here we find extremely cheap valuations based on the past and take the risk that these companies find a new growth engine.
Disclosure: I have covered all shorts but iron-ore related ones, but may trade in/out later.
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