In this article, we discuss Jim Chanos' 10 short positions in 2023. If you want to see more stocks in this selection, check out Jim Chanos' 5 Short Positions in 2023.
Investment manager Jim Chanos has made a name for himself on Wall Street by taking bold short positions even when the market seems to be in an uptrend. True to his trading strategy, the famed short seller took a swipe at the market early in the year, reiterating that valuation levels had run out of hand. He targeted NVIDIA Corporation (NASDAQ:NVDA), which was on a roll amid the AI boom, and Tesla, Inc. (NASDAQ:TSLA), a company he believes faces an uncertain future due to its reliance on the Chinese market.
Best known for predicting the collapse of the energy group Enron, Chanos raised concerns that the market was not in a position to overcome the rising interest rate environment. He also raised concerns over the risk of falling corporate profitability. Chanos noted that the market expected corporate profits to rise by 12% this year and inflation dropping to 2% amid the aggressive interest rate hike by the US Federal Reserve.
When the famed Wall Street hedge fund manager, who founded Kynikos Associates in 1985, made these claims, the S&P 500 was up by about 5%, bouncing after a 19% loss in 2022. While things were not as expensive as the previous year, the hedge fund manager reiterated they were not cheap, as the market was at 18 times forward earnings and profit margins were at all-time highs.
“I’ve been on the Street [since] 1980 [and] not one bear market has ever traded above nine times to 14 times the previous peak earnings,” the Chanos & Co. founder told CNBC’s “Fast Money” earlier this month.
Chanos has reiterated his concerns on whether the bullish scenario will hold. The legendary short seller remains short a number of counters after an impressive 2022 when his short-only fund Ursus beat the overall market. The fund gained 18% against a 19% loss for the S&P 500.
Jim Chanos' 10 Short Positions in 2023
Jim Chanos also shared his thoughts on the real estate sector. He believes the office sector continues to be troubled, especially in big cities. Consequently, he has raised several hundred million dollars to take short positions on US-listed real estate investment trusts.
According to the short seller, legacy data centers led by Digital Realty Trust, Inc. (NYSE:DLR) and Equinix, Inc. (NASDAQ:EQIX) face growing competition from tech giants. As Amazon.com, Inc. (NASDAQ:AMZN), Alphabet Inc. (NASDAQ:GOOGL), and Microsoft Corporation (NASDAQ:MSFT), the largest tenants of data centers, resort to building their own data centers, Chanos believes REITS with big exposure to data centers will be in trouble.
In addition to commercial real estate, Chanos has been skeptical about cryptocurrency, in particular Coinbase Global, Inc. (NASDAQ:COIN), which he believes faces stiff competition. He has also taken aim at the excessive hype around artificial intelligence as investors continue to pile on NVIDIA Corporation (NASDAQ:NVDA) and Advanced Micro Devices, Inc. (NASDAQ:AMD) on the belief they are well poised to cash in on the disruptive technology.
Our methodology
With the forward price to earnings of the S&P 500 above 18x, Chanos believes any reversion to the mean as earnings deflate will result in significant stock price declines. For this article we scanned Chanos' Q1'2023 portfolio and picked 10 stocks in which he initiated PUT options this year.
Robinhood Markets, Inc. (NASDAQ:HOOD) is a financial services company offering a platform allowing people to invest in stocks, exchange-traded funds, options, gold, and cryptocurrencies. While the stock is up by about 35% year to date, it remains under pressure in the aftermath of Google parent Alphabet dumping nearly 90% of its shares in the trading app.
The selloff comes as the user base in the Robinhood Markets, Inc. (NASDAQ:HOOD) trading platform continues to shrink, fueling revenue concerns. The stock is already down by 86% from its all-time high, a drop that has allowed the likes of Chanos to generate significant returns through their Put trades in the stock.
In recent years Jim Chanos has been skeptical about Uber Technologies, Inc. (NYSE:UBER). Early last year, the short seller raised doubts about the ride-sharing company’s ability to become EBITDA positive.
Despite the concerns, Uber Technologies, Inc. (NYSE:UBER) has been in fine form, rallying by 33% from when Chanos called the stock out. It is also up by about 76% year to date.
Harley-Davidson, Inc. (NYSE:HOG) faces an uncertain future amid the growing risk of recession. The company which develops and sells motorcycles has been under pressure going as the stock has dipped about 14% year to date.
In a recession, customers are unlikely to spend on discretionary purchases such as motorcycles. Likewise, Chanos remaining confident of a US recession explains why he is short on Harley-Davidson, Inc. (NYSE:HOG).
Caterpillar Inc. (NYSE:CAT) shares have gained in the second half of 2023 amid strong Q2 results. With management expecting demand for machines to be high amid growth in nonresidential construction in North America, the stock could continue rallying, putting Chanos and other short sellers under pressure on the Put trades on the stock.
6. Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM)
Value of Put Option: $986,012
Year to Date Gain: 28%
Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) was battered last year amid a Chinese government crackdown on tech giants and the ongoing tussle between the US and China over semiconductors. Fast forward, Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) has bounced back in 2023, rallying by more than 28%, year to date, even as Chanos remains bearish on the stock.
Even though Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) is down by 20% from its 2022 peak, it’s been in fine form as it benefits from growing hype around companies developing chips for the AI revolution.
