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Short Amazon: Do You Have the Guts?

Tickers in this article: NFLX AMZN LULU
NEW YORK ( TheStreet) -- I'm not sure there's a such thing as a pure Amazon.com (AMZN) short.

Remember, only about 2.3% of AMZN's float is held short. About 8.5 million shares. Contrast that to Lululemon (LULU) where shorts make up about one-fifth of the float.

AMZN bearishness is not commensurate with the short interest. But why?

TheStreet's Doug Kass, who writes for our Real Money and Real Money Pro premium services , gave me a sane, logical and correct answer last week on Twitter: Never ever short valuation, R .

Tough to argue with that, particularly when the wisdom comes from Kass.

That's what the AMZN bears base their pessimism on: Valuation and the belief that there's something wrong with the world beyond their limited view of it. The market is irrational. Investors who continue to not only support, but bid up AMZN stock are idiots.

It's the classic case of building a wall around a stubborn opinion and repeating it over and over again with this sense that destiny owes you a new result sooner rather than later.

AMZN's trailing 12-month price-to-earnings ratio of around 3,000 is all some people need to get bearish. I'll admit. That's pretty incredible -- 3,000! That's just off of the charts in any day and age.

AMZN bears refuse to put valuation in its proper context though. They do not situate it historically or think of it in conjunction with the massive long-term opportunity Jeff Bezos confidently chases at the expense of the bottom line. Not at all. They see the number. They're bears. Simplistic and straightforward.

So, I ask again, why don't they short the stock?

Kass gives us part of the answer, but, with all due respect to that small, yet vocal peanut gallery of AMZN bears, I'm not sure they're smart enough to adhere to such disciplined logic. Or maybe they're just not "dumb" enough to actually put their money where their mouth is.

Folks who shorted Netflix (NFLX) as it ran to $300 in 2011 absolutely did not do it on the basis of valuation and valuation alone. In fact, for the shorts who made the most compelling cases, it rarely came back to valuation. It came down to the business model, a doomed international expansion, uncertain market opportunity and the low likelihood that Netflix could leverage it without missteps.

It was much easier to talk the talk and walk the walk with Netflix because you had factors other than valuation -- such as incompetent management and tons of competent competition -- driving the core of the short case.

I personally know several folks who were short NFLX as it moved on air to $300. Some hedged. A few panicked. A couple couldn't take it and covered, but, by and large, these cats stood pat or added to the position. They became more bearish, more certain of their conviction the higher NFLX went. You can say the same about the AMZN bear's sentiment, however -- and this is key -- you can't say they're locked into short positions.