3 Potential Short Ideas For 2012

By Mark Goldstein In this article, I analyze three stocks that are overvalued on a relative value and growth basis. Due to what I think will be heightened uncertainty in their valuations going forward, these three stocks could be good short-selling candidates. I identify these stocks based on their trading prices that are not justified by their earnings outlooks. Netflix, Inc. (NFLX): Shares are trading around $125 at the time of writing, against their 52-week trading range of $74.25 to $304.79. At the current market price, this implies that the company is capitalized at $6 billion. Earnings per share for the last year were $4.40, and, being a growing tech name, it paid no recent dividend. Netflix offers Internet video streaming to computers running Windows or Mac OS X and to compatible devices. With the announcement of management changes, Netflix gave its fourth quarter earnings report on January 25. Netflix earned $40.7 million, or 73 cents a share. In the same period in 2010, it earned $47.1 million, or 87 cents a share. Expenses were the culprit, and I don’t see administrative and marketing expenses coming down any time soon given that competitors will begin to eat away Netflix’s market…