"Fool's Gold for Texas Instrument Shorts"
By Jim Cramer
RealMoney.com Columnist
12/12/2006 7:55 AM EST
"It was the perfect short. Texas Instruments (TXN - commentary - Cramer's Take - Rating) simply had everything bad happen all at once with its midquarter update: big inventory overhang, fall-off in demand, downward revision, particularly on the most important high end.
There was not a single positive about it -- a short-seller's dream. What I used to be most proud of was when I was able to nail one of these without a lot of capital, perhaps playing it with delicious December 30 puts.
But as you watched the trading when the news came out, you knew you were hung if you were short. The stock dropped 4 cents -- 4 cents, for heaven's sake! -- and then it stopped dropping entirely. Shorts smelled an upgrade and they got it with a vengeance -- a JP Morgan call saying the worst is over.
Forget for a moment that TXN has become a serial disappointer or that management seems to have lost its way. This was a bad update, a seminally bad update.
And it ended up calling the whole shortgame in question. I thought it might when Doug Kass has come out with his unbelievably good 25 surprises -- a well-thought and provocative list of what could happen in 2007 that I urge you to read.
In it, Doug talks about a private-equity purchase of TXN and I have to admit, post-Freescale (FSL - commentary - Cramer's Take - Rating), it makes a lot of sense. To me we are in a moment where the short business has become a nightmare, where every short is crowded and even businesses with no momentum whatsoever that haven't bottomed -- housing for example -- stopped going down months ago.
This phenomenon is all about supply and demand. Put simply, we don't have enough stock to go around. We don't even have enough tech stock to go around, although the underwriters are now doing their best to pump stuff out.
Texas Instruments? I don't want to own it. But I sure don't want to short it. No man's land. Which is the worst enemy of a short because it means you have to cover. "
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