value and opportunity

Books about short selling are few and rare so I decided to buy the Kindle version, which around 7,50 EUR is fairly cheap. The author, Amit Kumar runs an independent research firm called Artham Capital Partners and used to post occasionally on Seeking Alpha. There is also a “Manual of Ideas” interview with him to be found at Beyond Proxy.

The book itself is fairly short with 167 pages, which in itself is not bad. The book covers many aspects of short selling, including some case studies from the author himself.

However what is completely missing in my opinion are for instance references to existing books like the “Financial Shenanigans” classic from Howard M. Schilit. He also mentions David Einhorn’s Allied Capital Short thesis and Bill Ackman’s fight with MBIA, but again he does not reference to the book about Ackman and MBIA.

Jim Chanos, the most famous short seller, is mentioned once with in the context of Enron but nowhere else. Chanos made some great presentations for instance with regard to value traps.

It is also strange that in the beginning, the author explain the P/E ratio over a full page, but later on assumes quite some advanced accounting know how like knowing what Comprehensive Income is.

The best parts of the book are the sections where he lists the various areas in Balance Sheets and Income statements where to look for trouble and the interview with the guy behind “Off Wall Street”. Strangely enough, in his list he doesn’t mention the Cash Flow statement as another place to detect “Shenanigans”, but he gets a special point from me for mentioning differences between Net income and Comprehensive Income as a warning sign.

I would have also expected something about Chinese Reverse mergers, but it seems that the author somehow was not interested in that part of the market although it might have been one of the “Life time” short gold mines in the last few years.

So overall, I have some mixed feelings about the book. Yes, it covers a lot of stuff and there are not many books out there which cover the topic. On the other hand, a lot of important stuff and sources are missing. the book could gain a lot, by referencing more to existing works of other short sellers like Chanos, Block, Bronte etc.

Nevertheless, for the price offered I think the book looks like reasonable good value for investors who are generally interested in short selling, although in its current form it will be clearly not an “investment classic” anytime soon. T e fair, the author mentioned that there will be future editions of the book, so maybe he will add some of the missing parts.