I Don't Think I'll Be Shorting Winnebago or Realty Income

I mentioned Winnebago (WGO) as a possible short. Their reports disclose a large potential liability (>$100MM) for repurchase of recreation vehicles. I asked investor relations whether that dollar amount was the total dollar amount of vehicles they could be required to repurchase, OR if it was calculated as the maximum loss they could incur (repurchase price minus resale price) if forced to repurchase them? Turns out it is the former, which is not as bad. They only had $20,000 in losses from these repurchases in fiscal 2009. This is the type of trade I have to be careful about because I think that RVs are obscene, but clearly tons of people don't.

I also mentioned Realty Income (O) as a possible short. This is an Ackman idea. They do seem to have a bad tenant mix - lots of freestanding buildings with mom&pop tenants. However - unusual for a REIT - they seem to have no secured debt whatsoever. No mortgage debt, no secured bonds. Presumably, they can lever up and stick it to the unsecured bondholders by mortgaging the properties, which would allow them to keep raising the dividend. Also the whole hedge fund herd is going to short it, and then be covering whenever their gold positions sell off. Blah. I like my Regency Centers pair trade better.

So, while both of these could be decent shorts - I mean, I wouldn't buy them - I'm holding out for something better.

Results of Reader Poll

It's not too late to vote in the Credit Bubble Stocks poll about what kinds of posts you prefer.

Only a single digit percentage of daily readership voted. By an overwhelming majority, those voters wanted actionable trade ideas. Specifically, "long analytical posts about trade ideas."

People seem to like it when I cover a situation exhaustively, as I did with Downey Financial, Standard Pacific, and now Georgia Gulf.

So, I will try to deliver more of that type of content. It has been helpful to have more active commenters, giving feedback on ideas.

I will tell you about the two names I am researching now: Realty Income (O) as a potential pair trade and Winnebago (WGO) as a short. More to come on those.