Jim Chanos Talks Latest Major Short Win And How To Find New Opportunities
Avoid Chinese Stocks 'Like The Plague'
Investors need to simply avoid Chinese stocks "like the plague," Chanos said. Investors were once again "burned" in a Chinese company with unrealistic metrics and "all kinds of odd transactions with affiliates." In Luckin's case, the China-based company has an offshore entity in the Cayman Islands.
Chanos said he was short Luckin's stock on the recommendation of fellow short seller Muddy Waters and covered the short position prior to Thursday's market open.
"Luckin's a great example of — when people talk about banning short selling or restricting short selling. This stock was being talked about by the fundamental short sellers in the community in January and February as a fraud," Chanos said. "It's one of the things that short-sellers do: They're the real-time financial detectives."
See Also: Luckin Coffee Crashes After Company Admits COO 'Fabricated Transactions'
Don't Short 'Virus Stocks'
Chanos has a list of "30 names" that shouldn't be shorted in the current environment, most of which fall into the "virus stocks" categories. These are companies that are outperforming amid the coronavirus pandemic and would otherwise not necessarily be showing large-scale growth.
Some of the names on his list not to short includes Zoom Video Communications Inc ZM 11%, Peloton Interactive Inc PTON 4.36%, Teladoc Health Inc TDOC 2.07%, and Clorox Co CLX 2.64%.
"Of course when the virus subsides, and we all know it will, those companies will probably begin to not look as attractive going forward," Chanos said. "I would tell your viewers to be very, very careful about just piling into things that are doing well because people are inside and will stay inside for the next three, four, five weeks."
Uber: Fundamentally Unprofitable
Ride-hailing company Uber Technologies Inc UBER 7.24% guided to an adjusted EBITDA positive by the end of 2020 but will face higher payroll expenses in the near-term, Chanos said. It remains to be seen if the company can pass on the higher expenses to consumers amid the coronavirus outbreak.
Regardless, Uber was always an unprofitable company while its year-end guidance does not include share-based compensation which will total half a billion dollars a year.
"Are they really profitable if they aren't counting that?" he asked.
GrubHub: 'One Of My Favorite Positions'
A short position in third-party restaurant delivery company GrubHub Inc GRUB 12.03% is "one of my favorite positions," Chanos said. If the company won't show a profit in the first half of 2020 it will likely never earn a profit.
GrubHub may deserve credit for revising its stance on supporting independent restaurants through a $250 grant and other forms of support, Chanos said. Regardless, the underlying issue is GrubHub isn't a profitable business and by their own admission, they aren't making any money delivering burgers from fast food outlets.
In a post-coronavirus universe, independent restaurants who are seeing some success on GrubHub's platform today could feel it makes more sense economically to do delivery options themselves. Also, the delivery business can't be scaled as drivers are limited to around two deliveries per hour.
Kynikos Associates President Jim Chanos speaking in Detroit in 2017. Photo by Dustin Blitchok.
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