It’s no secret that high flying names like Facebook (FB), Netflix (NFLX), Priceline (PCLN) and Amazon (AMZN) have had a rough go of it over the last month. Still, when it comes to shorting names like those nothing can hold a candle to Tesla (TSLA). According to the research firm Markit, Elon Musk’s electric car company was the most shorted name on the Nasdaq 100 over the past month. This from a stock that, despite recent troubles, is up close to 360% in the last year.
“It’s been highly shorted for a while and i think you need to look at the reason why these companies are shorted,” says Joe Fahmy of Zor Capital. “People aren’t comfortable when stocks make these big moves too fast.”
Tesla, however, is different. “You can’t use traditional metrics to value companies that are disrupting our lives and revolutionizing the way we do things.”
Fahmy points to General Motors as a prime example. In the early 1900’s the car company was laughed at by many investors who couldn’t imagine roads full of internal combustion engines, all while the company went on a huge run in the market.
“It’s not too long before...there’s no gas anymore in any of the cars we’re using,” Fahmy says by comparison. “One thing I’ve learned about the stock market is that moves can go on a lot longer than you can ever expect.”
And as for that stock market, Fahmy weighed in on the rough waters it has been navigating for the past month. While he doesn’t see a huge 30% slide like some of the big momentum names have experienced, he does think this is part of a normal correction that will last through the summer.
“I think we’re still digesting the big move from last year,” Fahmy says. “I think the real upside is going to come in the fall...I think it’s a normal correction within a bull market.”
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