Concept stocks: An opportunity for short sellers

‘Growth pendulum swings back’

When WeWork’s parent company withdrew its proposed IPO in September, value investors everywhere likely breathed a sigh of relief the market had not completely abandoned all judgement.

The era of the "concept" stock is not necessarily dead, but signs suggest investors of all stripes are scrutinizing these "stories" more closely than in the recent past. Long/short strategies, as a result, are positioned to capitalize. For the uninitiated, a concept stock, by definition, has an extremely high price-to-sales ratio. Its valuation is driven, not by fundamentals or performance, but by the unique "concept" of the company, often featuring a value proposition characterized by a differentiated or disruptive business model. To be sure, concept stocks are not a new phenomenon. ...