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How to spot and short "dead companies walking"

Hedge fund manager Scott Fearon sheds light on market manias, over exuberance and how to profit when it all comes crumbling down
How to spot and short "dead companies walking"
  • Dead Companies Walking – first published in 2015 – offers interesting insight into the mentality required by short sellers
  • Investors pondering the current market irrationality would do well to pick up a copy

Michael Burry, who Christian Bale portrays as the investment world’s answer to Batman, has caused a stir following his recent decision to short Tesla (US:TSLA). Many investors cricked their necks earlier this month after Scion Asset Management purchased put options on 800,100 shares worth over half a billion dollars, wondering whether should they be following suit. Somewhere that they might turn to help them decide is Scott Fearon’s highly acclaimed book, Dead Companies Walking: How A Hedge Fund Manager Finds Opportunity In Unexpected Places.

The tome – first published in 2015 – reveals how to tell when a company is sliding toward bankruptcy, regardless of the stock price, and how to profit from it. Fearon identifies a number of common errors made by both private and institutional investors when picking shares. These include a heavy reliance on basic metrics and formulas, misunderstanding target customers, failing to adapt to industry shifts and remaining physically or emotionally removed from a business’s operations. Identifying and removing those errors can help investors avoid the pitfalls of poor stock picking.

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