"Its the Achilles heel of a long that produces a short".

If I'm right (most conviction in 25yrs in biz) being long puts $TITN will make investors biggest return of lifetime http://t.co/psn0YG4pwY

— tom renna (@GFNNstock) April 5, 2014

Top #Short Pick of a Lifetime #bear $titn Equities Research: "The Achilles heel of a long that produces a short... http://t.co/JlpONrkvf3

— tom renna (@GFNNstock) April 5, 2014

In my 25 years analyzing stocks I have never had more conviction in the direction of a Stock as I do in my bearish call on Titan Machinery (NASDAQ: TITN).  A year ago in my February 2013 monthly newsletter my subscribers were given Titan as my top short pick when shares were trading near $30 a share.

Over the past 14 months, while the market has rallied to all time highs the shares of Titan have declined 50%.

Titan Machinery will report Fiscal 2014 year end financials on Thursday, April 10th in the pre-market.

Although shares are difficult to borrow for a short sale, traders can make a bearish bet by getting long puts.

I have written extensively on the stock over the past 14 months and recently Michael Markowski, the founder of OnlineFinancialSector.com has also written reports.

Below are comments both Michael and I have made in the Seekingalpha comment section of an article Mike published this week regarding Titan Machinery.

• Thomas Renna
    This is no joking matter, be careful on long side. Here's a warning from last April when shares were in $30 neighborhood.
  
  
  http://bit.ly/15Mr0rE
  
  
  This is beyond a macro-view (Agriculture/Construct... its not simply about the space (sector) , you need to analyze management too.
  
  
  Note that the Management that put this company in the mess is still there  

•  It will be interesting to see if the new auditor allows the company to recognize revenue in Fiscal 2014 in this same manner as Fiscal 2013: (from Fiscal 2013 10K):
  " However, in certain circumstances, and upon the customer's written request, equipment revenue is recognized before delivery occurs" 

•  Markowski Comments:
•  Titan according to its 10/31/13 Balance sheet has $1.17 Billion in inventory and it has a tangible book value of $362 million. If it had to mark its inventory down by 10% it would result in $117 million in losses and its book value would also fall by $117 million or by approximately 30% to $245 million.
  
  
  The problem is that Titan's inventory consists of new and used tractors and they depreciate with each passing day. If Titan had to mark its inventory down by 30% to raise cash it could potentially wipe out practically all of the company's entire tangible book value. 
•  However, there is no such thing as a "perfect long". Its because its impossible for anyone including a company's management team to foresee the negative things that can affect a company. No company is immune to this.
  
  
  On the other hand a perfect short is much easier to predict due to the perils that not even the predictor would see for a company. Its the achilles heel of a long that produces a short.
  
  
  I am an eternal optimist and a long term investor. However, being long defies the law of gravity. Everything that goes up eventually comes down due to changes in consumer habits and technology. Blockbuster and Radio Shack are good examples. Being short coincides with the law of gravity.
•  Agriculture and seasonality has nothing to do with Titan Machinery's chronic negative cash flow. Titan has not had a single year of positive operating cash flow over its past five years. Almost a year ago the price of corn was a 100% higher. Titan still generated negative annualized operating cash flow.
  
  
  Titan's problem is that its increasing its sales or revenue is totally dependent on its ability to get access to an ever increasing supply of capital. At some point a company reaches the point at which they can not sell any more shares or increase their credit lines. I believe that Titan has reached that point and that is why its become a perfect short. 
•  Just remember that the credit worthiness of both an individual and a business goes down as the debt grows and accounts for a higher percentage of the total enterpise value (market cap plus all debt). The cost of credit increases and at some point there is no additional credit available. You don't want to be buying dips when that happens.

"Its the Achilles heel of a long that produces a short"

...Michael Markowski, founder of OnlineFinancialSector.com