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Sohn Conference: Jim Chanos on Shorting Elon Musk, Valeant, and Alibaba

Is there anyone in the investment community who hasn’t heard about famed short-seller Jim Chanos? Highly unlikely! Mr. Chanos, founder and manager of Kynikos Associates LP, is best known for his public short of Enron, whose collapse is seen as one of the worst business failures in American history. The renowned and successful short-seller presented his market-moving investment ideas at the 2016 Ira Sohn Conference this week, which was attended by Insider Monkey. Thus, the following article will discuss several short investment theses of Mr. Chanos, as well as his thoughts and insights on the Chinese economy.

At Insider Monkey, we track around 785 hedge funds and institutional investors. Through extensive backtests, we have determined that imitating some of the stocks that these investors are collectively bullish on can help retail investors generate double digits of alpha per year. The key is to focus on the small-cap picks of these funds, which are usually less followed by the broader market and allow for larger price inefficiencies (see more details about our small-cap strategy).

Jim Chanos’ Short Thesis on Electric Automaker Tesla Motors

Let’s kick off our discussion by having a look at Jim Chanos’ short on Elon Musk’s Tesla Motors Inc. (NASDAQ:TSLA). The hedge fund manager said on CNBC’s ‘Fast Money Halftime Report’ from the Sohn Investment Conference that “one of our historical sign posts of a company in trouble is when numbers of senior people leave over a short period of time”, claiming that “Tesla fits that bill”. Earlier this week, the electric car marker confirmed that Vice President of Production, Greg Reichow, and Vice President of Manufacturing, Josh Ensign, were leaving the company.

However, Mr. Chanos’ short thesis on Tesla Motors Inc. (NASDAQ:TSLA) doesn’t solely rely on the executive exodus, pointing the finger to the profitability of Tesla’s business. “[…] this is a company that can’t forecast its deliveries one quarter out”, said the manager of Kynikos Associates. “And yet, everybody is confident about what they’re going to make in 2020 or 2025”. More importantly, the short-seller claims he would want Tesla Motors to make the Model 3 and sell it profitably, but he doesn’t “think they can do it”.

The shares of the electric automaker are down by 11% year-to-date, as the company’s narrower-than-expected loss for the first quarter was overshadowed by the news that the aforementioned manufacturing executives would be leaving. Daniel Benton’s Andor Capital Management had 1.00 million shares of Tesla Motors Inc. (NASDAQ:TSLA) in its equity portfolio at the end of December.

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The next page of this article will discuss another “Elon Musk” short and Mr. Chanos’ thoughts on two other companies.

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