 Good day fellow investors! Yesterday I discussed some macro reasons to go short or at least to watch out for and today we're going to talk about 10 things you should watch out for before going long or if you are long you should watch for those things or if you want to go short those are the 10 things you want to look for. So let's immediately start. Number one the stupidest thing one could ever do is to fight the trend. Don't fight the trend is rule number one when investing. Two days ago we discussed how ETFs keep getting cash into them so they keep buying the market index funds and therefore fighting such a trend should be really really stupid because as long as the majority keeps buying you are going to lose money if you bet against that or you're going to miss out if you are not included. So the first point is to really see when the trend will revert or if there is a long term trend take advantage of that. The people that have been buying stocks for the past nine years they won't sell immediately in a few days. When the stock market turns the sell-off will last a little bit longer as their perception of the world drifts and adjusts to the new environment. So there will be plenty of time for shorting the key to going short is timing and the key of how long you should be long is the trend. So also if you're long look at the trend the trend the trend has to always be your friend. Number two number two we have to look at earnings and estimate earnings and look for deteriorating fundamentals. If you can see okay there is no way this company is going to hit that guidance then okay that's a short candidate or if the guidance is based on too much optimism from the management then you also know okay this is a short candidate or at least you know I should get out because the risks are increasing and what happens is when a company misses guidance earnings are lower then fundamentals deteriorate and then if the growth rate is smaller analysts adjust their long-term models for the new growth rate for the new things that happened and this can really make them adjust the target price by a lot because one small change in the growth rate now if you apply that in a linear if you extrapolate that in a long-term model that hurts really really the target price and then when that happens costs that costs increase for the company rating agencies re-rate the company and you have downgrades and then the spiral the downward spiral starts of course if the company doesn't surprise on earnings but when you find such a negative trend sector trend country trend environment trend whatever where earnings start to deteriorate fundamentals you know you're in good place for a short and not go long there number three overvalued fundamentals now fundamentals have been overvalued for quite a while and you have to connect it to number one the trend nevertheless the more fundamentals are overvalued the more valuations are stretched the more a company is in debt and the more a company expects the same situation to continue for the long term i don't know companies taking a lot of that to make an acquisition that's a risky acquisition in a cyclical perspective and such things then you see okay those fundamentals are too stretched there will be trouble and there is where you have to look for and mark okay i'm going to watch this stock because when things change it takes a lot for a company like Boeing to fall for from 330 where it is now to 100 in that trend there will be a lot of possibilities to take advantage because it won't fall in one day but if the trend shifts if earnings start to deteriorate the company gets downgraded then you will slowly see it go from 330 to 100 and even if you short it from 200 to 100 you will do a great job number four insider activity sometimes if the company is doing good then people overlook what the insiders are doing so however if you're an insider and you're really focused on the company and you know the company will do extremely well you don't sell shares and if we look at snapchat you can see that the number of sales is much bigger than the number of buys and those buys are usually made at the price of zero from vested options so the management tells you here we are selling shares we are mostly selling our shares now this might mean nothing but this might also mean a lot is this a short term play do they understand the environment better than we do that's a question for snapchat investors nevertheless another thing to look and when you have an array of factors it's easier to make decisions number five accounting issues when you look at the company and you can see okay there are accounting issues those are bumps that explode in one moment and those really can create a spiral of negative news so you have to be a specialist to find accounting issues but even if there is some news about accounting issues you might want to dig deeper into that and then okay say this is a bigger risk so there are potential issues and here now this company is really good on their accounting and really conservative so on those things you might want to look okay higher probability for shorting lower probability for shorting companies that have a lot of goodwill that they have gained by doing a lot of acquisitions in the last nine years we'll see a lot of trouble when that goodwill has to be impaired if the acquisition was at a very very high expensive price number six debt and refinancing there are a lot of companies that are stretched now in their debt and refinancing and that's only thanks to low interest rates and to an abundance of capital and liquidity tesla would never be able to refinance to recapitalize itself without such an environment so i'm not going to talk about tesla now but i'm just going to use it as an example because if tesla gets hit by a higher interest rate and people say it's unlikely you're never going to reach those targets you are promising for already 10 years and you cannot even make manufacturer model free as you have promised so at one point in time people are going to say no i'm not going to give you my money anymore because this is much more interesting because of the higher interest rate which much less risk and when that happens when one says no all the other says no and then in panic the company can't refinance and can go bankrupt in a few months that's the risk of investing in tesla i'm not saying it will happen i'm just saying that's a risk so look at that and refinancing possibilities in the future number seven negative sector trends a company can do whatever it wants but if the sector trend is negative it will hit the bottom line and the top line of the company whatever the company does especially if the company is going to do crazy things to keep the growth rate in the negative sector trends you know at sooner or later that's where the company is going to break so really look at sector trends at the environment we see a lot of disruption and a lot of the current business models are going to be disrupted as hell in the next five years so watch for that when going short it's always important to look at liquidity and availability of options to go short or at the liquidity of the stock if you go short if you are getting into a short squeeze you will get burned and that's something you don't want so you want the company that there is plenty of liquidity that there isn't too much short interest but that there are really possibilities for you to do well in the medium short medium long term whatever is your short period your short timing we will be talking more about short squeezes in the next video why you shouldn't go short which is a video i think many of you will find very very interesting number nine short interest if there is a lot of short interest in the stock which you can see at your broker they will say what is the percentage of stock shorted of the outstanding number of stocks and if there is a lot of short interest it means that you might be already too late so really look at the short interest because those people will need to cover that short position and that might push the stock higher and that's not a good thing when you are short something number 10 shorting is about as everything else in investing is about managing risks so you might be short something but the key is first to see okay what's my risk how can i manage that risk how can i be protected what's the worst that can happen and then see okay what's my risk in relation to the reward when that is positive then there is value in a short or input option or something like that if you're just betting like a casino and you know okay this is not going to end well but might end well over the long term you will get burned so it's really managing risk probabilities and that's the key risk probabilities in time because when shorting you really should look at time so these are the 10 things that i would look in individual stocks where i wouldn't be long or where i see short potential in the future i'm not going to try to time the market and really get the reversal i would like the trend to be my friend and that's something that i have to be ready for and that's why i'm talking now about shorting next video will be about reasons why you shouldn't be short and why shorting is dangerous and why shorting should be left for two professionals and then if you are still convinced that you want to explore shorting then then i'll make a video again about the mechanics of how you should short and what's the cost of going short now thank you for watching looking forward to the comments and i'll see you in the next video