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There are several reasons I like Tiffany & Co. (TIF) as a long-term shorting opportunity.
For starters, the company saw a 16% drop in revenue last quarter, including a 27% drop in the United States, despite 15 new store openings. And the
stock is overvalued and overbought after an 11% pop last month.But the main reason I think you should short TIF is the consumer. Or, should I ask, “What consumer?” Consumer confidence is falling again, unemployment
is rising, and income is falling. What’s more, credit lines are evaporating — as much as $2.7 trillion in credit for consumers may disappear this
year. Ever see people buy anything at Tiffany with cash?In addition, rising gold, silver and platinum prices will make the company’s products even more expensive and harder for people to afford. During
the past few days, the stock has risen because the value of the company’s inventory has theoretically risen. Eventually, though, the rise in precious
metal prices will be felt in-store, dampening already weak demand.
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How to Short TIF
This is not a short-term trading idea. The market is going up right now and taking everything with it — even the weakest companies and worst stocks.
Rather, this is a fundamental short based on what is happening and what will happen in the real world, because we are not even close to being out
of the woods yet.If you want to short Tiffany & Co. (TIF) right now, you are just going to have to
deal with an up market and foolish optimism about consumer spending. But, this too shall pass. So you’re best bet is to look at the put options with
the furthest out expiration date, the January 2011s. The stock is currently trading around $36, but I think there’s a good chance it could be half
that by 2011.When this market comes back to its senses, you’ll be able to make a killing shorting stocks. But before you even think about doing that, there are
a few things you need to know…
