One Stock That You Will Regret Not Shorting

Many investors are buying the recent dip in the stock market, however I have been looking for shorting opportunities. I think investors shorting the rallies will benefit a lot more than investors buying stocks on the dip.

The market has headed higher in the last few days and I think the recent rally has opened up many shorting opportunities. Readers familiar with my articles already know that I have been advising to short stocks for over four months now. My bearish stance on the market has yielded double-digit returns and has widely outperformed the market.

In this article, I will be discussing why Cadiz (CDZI) is a short.
Cadiz operates as a land and water resource development company in the U.S. It engages in the water resource, and land and agricultural development activities in San Bernardino County properties. The company owns approximately 34,000 acres of land and the subsurface strata, including unsaturated soils and appurtenant water rights in the Cadiz and Fenner valleys of eastern San Bernardino County; and approximately 11,000 additional acres in the eastern Mojave Desert in eastern San Bernardino County. The reasons why I think Cadiz is a short are mentioned below.


The first reason to short Cadiz is the company’s absurd valuation. After the recent rally, Cadiz is now trading at a P/S ratio of almost 350. In addition, the EV/revenue ratio stands at a towering 693. To make matters worse, Cadiz is still not profitable and has a EV/EBITDA ratio of -16.

Debt & Dilution

Cadiz has a debt of over $110 million versus cash of only $6.39 million. What makes the matters worse for Cadiz is the fact that a hefty portion of this loan is to be repaid in the upcoming months and the company’s doesn’t have enough cash to do so.

Cadiz has been burning cash at a rapid rate and it will be difficult for it to manage its debt and continue paying for its operations. As a result, I think the company may soon run out of money and may have to offer a secondary offering in order to continue its operations.

Over $30 million of Cadiz’s debt is due in March, which is why I think the probability of dilution is high, making it a compelling short candidate.


Given the headwinds mentioned above, I think investors should short Cadiz after the recent rally. The stock is clearly overvalued and the headwinds aren’t price in. Moreover, the company is running out of cash and will soon need to dilute stocks to pay off its debt and continue its operation. Due to these factors, I think Cadiz is a compelling short.
Published on Feb 18, 2016
By Ayush Singh

Copyrighted 2020. Content published with author's permission.

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