SINA Corporation (SINA) – Closing Short Position – down 53% vs. S&P up 72%

SINA Corporation (SINA: $40/share) was originally featured on 10/10/13. At the time of the initial report, the stock received a Very Unattractive rating. Our short thesis pointed out the firm’s declining ROIC, negative economic earnings, and expensive valuation.

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During the nearly 6-year holding period, SINA outperformed as a short position, declining 53% compared to a 72% gain for the S&P 500.

Since our original report, SINA has bounced around, falling as low as $32/share in early 2015 and rising as high as $123/share in early 2018. The company’s fundamentals have improved in recent years, and its return on invested capital (ROIC) has risen from 3% in 2013 to 19% TTM. SINA has earned positive economic earnings in each of the past three years and its stock now trades below its economic book value. The stock no longer presents the same risk/reward given the firm’s improved profitability and cheaper valuation. We believe it is time to take the gains and close this short position.

Figure 1: SINA vs. S&P 500 – Price Return – Successful Short Call

Sources: New Constructs, LLC and company filings

Note: Gain/Decline performance analysis excludes transaction costs and dividends.

This article originally published on October 4, 2019.

Disclosure: David Trainer, Kyle Guske II, and Sam McBride receive no compensation to write about any specific stock, style, or theme.

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