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Is Short Selling Stocks Worth It?

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For most investors, buying and holding a stock is extremely intuitive.

When you go long, you are betting on that particular company’s success. You are hoping that the market values the stock higher in the future than they do today. Then, when you sell your stake in the company, you’ll realize those gains for a profit.

What is less intuitive is the practice of short selling – or betting against a specific stock or security. While the concept may seem simple at first glance, the actual mechanics behind it are much more complicated for an entry-level investor to understand.

Further, short selling has all kinds of intrinsic risks and costs that need to be understood before it should be used as a tactic. Not grasping these risks can lead to all kinds of horror stories.

Is Short Selling Stocks Worth It?

Today’s infographic comes from StocksToTrade.com, and it addresses the question of whether the risk of short selling is worth the potential payoff.

Our thoughts? Short selling is a tactic used by intermediate to advanced traders, and it should only be attempted by someone who understands the mechanics and risks behind it. Under those circumstances, it can be a useful way to hedge or to profit in a down market.

Is Short Selling Stocks Worth It?

Is short selling worth it? It likely depends on your level of sophistication and risk tolerance.

The Risks of Short Selling

Here are the specific risks of short selling that every investor should be aware of:

  • Losses can keep mounting. The maximum profit you can make is capped at 100% – but if a stock keeps increasing in price, losses can accumulate far beyond that.
  • Additional costs. Short selling has a different set of costs than simply buying a stock. These include margin interest, stock borrowing costs, and dividends.
  • Short squeezes and other events. Stocks with high demand for shorting can have a “short squeeze” – an event that forces short sellers to close out their short positions. This can add even more upward pressure on the stock.
  • Timing is crucial. Over time, generally markets have moved upwards. Even if your short play is a good idea, the market could continue to carry the stock in the interim.

Got a shorting success or horror story? Feel free to share it in the comments below.

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Pandemic Recovery: Have BEACH Stocks Bounced Back?

BEACH stocks—bookings, entertainment, airlines, cruises, and hotels—were pulverized at the beginning of the pandemic. Here’s how they’ve bounced back.

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Pandemic Recovery: Have BEACH Stocks Bounced Back?

The travel and entertainment industries have had a volatile ride over the last year.

During the initial stages of the pandemic, when panic and uncertainty ran rife, BEACH stocks–booking, entertainment, airlines, cruises, and hotels—were left scrambling. Collectively, $332 billion in market cap washed away.

Now, it appears the tide might be turning for these companies, buoyed by vaccine breakthroughs and glimmers of hope for a return to normalcy.

This infographic looks at the growth in market cap value across BEACH stocks one year from when the WHO officially declared COVID-19 a pandemic.

Washing Back to Shore?

BEACH stocks have gained a collective $376 billion in market cap in the year since the pandemic was declared, with about half the companies trading at their respective all-time highs.

In fact, about 70% of BEACH stocks have actually outperformed the S&P 500, which returned 43.7% during the same period.

CompanyTickerCategoryMarket Cap: 03/11/20 ($B)Market Cap: 03/11/21 ($B)Change
American AirlinesAALAirlines7.214.296%
Southwest AirlinesLUVAirlines23.534.446%
Alaska Air GroupALKAirlines5.78.142%
United AirlinesUALAirlines13.017.233%
Air CanadaACAirlines5.97.933%
Delta Air LinesDALAirlines29.130.96%
Expedia GroupEXPEBooking12.024.6105%
Allegiant TravelALGTBooking2.04.198%
Booking HoldingsBKNGBooking64.096.051%
Caesars EntertainmentCZRCasino & Hotel2.220.8824%
Norwegian Cruise LinesNCLHCruise & Casino4.310.9151%
Royal Caribbean CruisesRCLCruise & Casino10.822.4108%
CarnivalCCLCruise & Casino16.431.893%
Penn National GamingPENNEntertainment & Live Events2.620.4661%
Six FlagsSIXEntertainment & Live Events1.74.1142%
Live NationLYVEntertainment & Live Events10.819.379%
The Walt Disney CoDISEntertainment & Live Events201.2357.177%
Cedar FairFUNEntertainment & Live Events1.82.857%
HiltonHLTHotels25.034.638%
Marriott InternationalMARHotels35.648.235%
Choice Hotels InternationalCHHHotels4.55.930%
Hyatt HotelsHHotels6.78.729%
Marriott Vacations WorldwideVACHotels & Resorts3.87.7103%
Vail ResortsMTNHotels & Resorts7.113.488%
Park Hotels & ResortsPKHotels & Resorts3.45.358%
Wyndham Hotels & ResortsWHHotels & Resorts4.26.451%
MGM Resorts InternationalMGMResorts & Casino10.219.389%
Wynn ResortsWYNNResorts & Casino9.715.964%
Las Vegas SandsLVSResorts & Casino40.748.218%

BEACH Stocks Leaders and Laggards

When dissecting this basket of stocks by industry, it’s clear that much of the recovery story is lopsided. One reason for this, despite the pandemic, is that there are more granular, idiosyncratic trends occurring within these sectors.

Let’s look at what’s propelling the leaders, and dragging down the laggards:

Leading: Online Betting

There’s reason to be bullish on gambling stocks. Since late 2018, some 20 states have legalized sports betting, with more expecting to follow. Relative to other areas, the pandemic has been kind to gambling stocks. Many of those with an online presence have witnessed a spike in traffic, as more people continue to flock towards online betting.

Within the BEACH stocks basket, Penn National Gaming and Caesars Entertainment are clear outliers, having grown an epic 661% and 823% respectively. In addition, the broader industry (measured by the BETZ ETF) has nearly doubled the performance of the S&P 500 since its inception.

Laggard: Airlines

The return to normalcy will be much more delayed for airlines. Global RPKs, an industry metric, are not expected to reach pre-pandemic levels until 2024.

Actions of insiders also seem to match this negative sentiment. Warren Buffett, once a staunch supporter of airlines, decided to call it quits during the pandemic—dumping his entire position.

Airline COVID RPKs

U.S. airline executives have collectively been selling their stakes much more aggressively than in the last few years. To add insult to injury, there’s significant shorting of airline stocks as well. At a short interest of 11.6%, American Airlines is most heavily shorted BEACH stock.

Laggard: Hotels

In a year where social interactions and gatherings have largely disappeared, so too has much of the business activity for hotels. For instance, Hilton sales suffered a 58% decline year-over-year.

But even without the pandemic, the hotel industry had their work cut out for them, through a growing and formidable competitor in Airbnb. Airbnb can scale its network beyond what any hotel can. This is evident in its room count, which is greater than the largest hotels combined.

Airbnb room count vs hotels

More Bumps On The Road Ahead?

The investing landscape today looks to be disconnected from reality, in part because of the forward-looking nature of markets. Even though things are dire today, there’s a belief that light exists at the end of the tunnel.

But the path to recovery isn’t quite so linear. When the dust settles, it’ll become more apparent which industries will “return to normal” and which have set out permanently on a new trajectory.

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Mapped: The Top 10 Billionaire Cities

Where do the most billionaires live? For years, NYC has topped the list of billionaire cities, but 2020 marked a monumental shift.

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top 10 cities for billionaires

Mapped: The Top 10 Billionaire Cities in 2020

In 2020, the world gained 493 new billionaires—that’s one every 17 hours.

For the last seven years, New York City has been home to more billionaires than any other city in the world. However, last year marked a monumental shift in the status quo.

Beijing has unseated the Big Apple, and is now home to 100 billionaires. That’s one more billionaire than the 99 living in New York City.

Today’s map uses data from Forbes to display the top 10 cities that house the most billionaires.

Where do the Most Billionaires Live?

The richest of the rich are quite concentrated in cities, but some cities seem to best suit the billionaire lifestyle. Here’s a breakdown of the top 10 billionaire capitals and the collective net worth of all the ultra wealthy that live there.

RankCityRegionNumber of BillionairesNet Worth of the City's Billionaires
#1Beijing🇨🇳 Asia100$484.3B
#2New York City 🇺🇸 North America99$560.5B
#3Hong Kong🇨🇳 Asia80$448.4B
#4Moscow🇷🇺 Europe79$420.6B
#5Shenzhen🇨🇳 Asia68$415.3B
#6Shanghai 🇨🇳 Asia64$259.6B
#7London 🇬🇧 Europe63$316.1B
#8Mumbai🇮🇳 Asia48$265.0B
#9San Fransisco🇺🇸 North America48$190.0B
#10Hangzhou🇨🇳 Asia47$269.2B

Some cities have some obvious billionaires that come to mind. New York’s richest person and former mayor, Michael Bloomberg, is worth $59 billion. Beijing’s richest billionaire is the founder of TikTok (among other things), Zhang Yiming with a net worth of $35.6 billion.

In terms of the locations themselves, London, New York, and San Francisco are the only Western cities to make the list. Though New York was ousted from the top position last year, altogether the city’s billionaires are still worth more than Beijing’s.

One new city to make the top 10 list of billionaire cities was Hangzhou, the home of Jack Ma. It booted out Singapore from the 10th spot.

East Meets West

More than half of the top 10 cities are located in Asia, providing evidence of the shift eastwards when it comes to seats of wealth. Five of the six Asian cities listed are all in China.

What’s helped lead to this?

The country has seen an e-commerce boom, not in the least thanks to the pandemic. Additionally, the efficient handling of COVID-19 has allowed the economy to get back on track much more quickly than other countries. According to the BBC, 50% of China’s new billionaires have made their wealth either through tech or manufacturing.

Four of the Chinese cities on the list also had the biggest billionaire growth in 2020. Each of them gained more than 10 net new billionaires:

  • 🇨🇳 Hangzhou: 21
  • 🇨🇳 Shanghai: 18
  • 🇨🇳 Shenzhen: 24
  • 🇨🇳 Beijing: 33

The only other city to gain more than 10 new billionaires in 2020 was San Francisco with 11.

Now sitting at 698 billionaires, China is coming up on the 724 held by the United States. Beijing overtaking NYC could be the beginning of a larger tipping point.

Shifting Tides

Asia-Pacific’s collective 1,149 billionaires are worth $4.7 trillion, while U.S. billionaires are worth $4.4 trillion in total wealth.

Overall, it looks like the wealth tides may be turning as China continues to progress economically and more billionaires become based in the East over the West.

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