Jim Rogers criteria to look for beforeinvesting in a company
The best short candidates are stocks where Institutionsown more than 3 quarter of the shares.
Never try and make money from insider because it isalmost impossible to do so on a consistent basis.
Buy stocks of companies that are so undervalued thateven if nothing positive happens the maximum you canlose is on the opportunity cost of capital.
The micro numbers that he loved working on were:
Capital Expenditure as a percentage of depreciation, gross plantand net plant
The ratio is highest when the company is at thetop of a cycle and vice versa. Compare this with a cash flowanalysis. At times of high capital expenditure plans the free cashflow diminishes and equity valuations take a hit.
Look at ratio of sales to receivables, debt to equity. A very highprofit margin with lower inventories and increasing capitalexpenditure is another indication to go short on a company.
Growth stocks are classic cases of shorting opportunities.