STX

Jim Chanos Short Ideas in PC Sector: Ira Sohn Conference

Jim Chanos short ideas usually attract much attention. Chanos is Founder and Managing Partner of Kynikos Associates LP., possibly most famous short biased hedge fund. He spoke at the Ira Sohn Conference on May 8 regarding his latest ideas. Previously, Chanos disclosed that he holds short positions in Dell Inc. (NASDAQ:DELL) and Hewlett-Packard Company (NYSE:HPQ). At the Ira Sohn Conference, Chanos made his case for shorting PC components, including hard drives.

Jim Chanos Short Ideas in PC Sector: Ira Sohn Conference

 Jim Chanos Short Ideas: Microsoft

Chanos notes that PC sales, particularly desktop PC sales, are falling as users are migrating to mobile computing, including laptops, tablets, and smartphones. The process of declining desktop PC sales has just begun and it could render the PC obsolete. PC sales peaked in 2012 and have begun to trend down this year, while sales of smartphones and tablets have surged. Microsoft Corporation (NASDAQ:MSFT)’s launch of Windows 8, its latest operating system friendlier to touch screens, has not helped bolster PC sales. Users without touch screen monitors expressed dissatisfaction with the default tile interface and the lack of the start menu, a feature that has been a staple of Windows for almost 2 decades. Microsoft Corporation (NASDAQ:MSFT) is planning to launch an update to Windows 8 this year, Windows Blue, which could bring back the start menu and the default traditional desktop interface.

Jim Chanos Short Ideas PC related companies

Such trend calls for price corrections in stocks of companies that provide PC components, such as hard drive manufacturers. According to Chanos, Western Digital Corp. (NASDAQ:WDC) and Seagate have benefited from high prices, so high that they could make about 10 percent of the PC’s sale price. Maintaining such price is unsustainable, as PC makers are operating on thin margins and sales of desktop PCs are declining. Profitability of hard drive manufacturers may also suffer from cost increases, as floods in Thailand may pressure output from production facilities. Companies with diversified electronics businesses like Samsung are exciting the hard drive business. In 2001 Samsung sold its disk drive business to Seagate Technology PLC (NASDAQ:STX).

Chanos also argues that there is digital storage supply excess, as users still have more than enough space in their PCs and mobile devices to store videos and pictures. Server sales have not penetrated the market significantly, and the cloud is making storage more efficient. All these factors translate into lower demand for storage in hard drives and servers.

Jim Chanos Short Ideas: STX Targeted

Other elements that Chanos considers to make a short determination include insider sales and executive turnover. Between October 2011 and 2012, holdings of the four top executives at Seagate Technology PLC (NASDAQ:STX) seem to have declined by about 50 percent. In addition, one of the top three executives left yesterday.

STX

LEAVE A COMMENT


Saved Articles
X
TextTExtLInkTextTExtLInk

The Life and Career of Charlie Munger

Charlie is more than just Warren Buffett’s friend and Berkshire Hathaway’s Vice Chairman – Buffett has actually credited him with redefining how he looks at investing. Now you can learn from Charlie firsthand via this incredible ebook and over a dozen other famous investor studies by signing up below:

  • Learn from the best and forever change your investing perspective
  • One incredible tidbit of knowledge after another in the page-turning masterpiece of a book
  • Discover the secrets to Charlie’s success and how to apply it to your investing
Never Miss A Story!
Subscribe to ValueWalk Newsletter. We respect your privacy.

Congrats! Are you a smart person?

We have an exclusive targeted & limited time offer for being a sophisticated and loyal reader.

ValueWalkPremium is a website and newsletter on the latest industry news much of which is not in the public domain and obtained via our sources.

We also have 10 years of resources on how to use this information to better your investment process.

Sign up for  today and get our exclusive content for 40% off. This is our second biggest discount ever!!

Use coupon code VIP20 or click on the button below

Limited time offer only ENDS 2/29/2019 or after next 25 subscribers take advantage whichever comes first – please do not share this discount with others

 

0