Last week, we looked at three of our worst Danger Zone picks from 2020. This week, we’re looking at the blowups we successfully anticipated during 2020. Casper Sleep (CSPR: $7/share), Teradata Corporation (TDC: $25/share), and DoorDash (DASH: $207/share) are the Danger Zone highlights from 2020. We remain bearish on two of these stocks and are closing one.
In 2020, our Danger Zone picks overall failed to outperform as shorts, as the market soared to record heights. Only 11 out of our 34 Danger Zone picks outperformed the market (S&P 500) as shorts.
Overall, the Danger Zone stocks, including reiterated and closed ideas, averaged a 57% return in 2020 versus the S&P 500’s average return of 18% from each report’s published date.
Our Danger Zone reports combine our proprietary fundamental data, proven superior in The Journal of Financial Economics, with qualitative research to highlight firms whose stocks present among the worst risk/reward. Danger Zone reports show investors how to use our research and the transparency of our analytical process.
Figure 1: Performance From Each Danger Zone Publish Date Through 12/31/2020
Sources: New Constructs, LLC
We first put Casper Sleep in the Danger Zone in February 2020 prior to its IPO just a few days later. At the time, we noted the firm’s slowing and profitless revenue growth, weak competitive position, exorbitant expenses, and overvalued stock price. Despite outperforming as a short since its IPO, the stock remains overvalued and still holds significant downside risk.
What Went Right (for a Short Position):
Casper has been unable to drive meaningful improvement in profitability, despite mattress and pillow sales soaring as consumers spend more time at home. The firm was hampered by supply chain issues and retail stores with little to no traffic due to closures. These challenges resulted in the firm missing earnings estimates in two of the past three quarters and revenue estimates in the most recent quarter.
We expect Casper to continue to struggle to meet revenue and earnings estimates in the face of significant competition from mattress providers such as Sleep Number (SNBR), Tempur Sealy International (TPX, Serta Simmons, Leesa, Tuft & Needle, Purple (PRPL) and home goods providers such as Walmart (WMT), Amazon (AMZN), Bed Bath & Beyond (BBBY), Wayfair (W), Overstock.com (OSTK), and many more.
This article originally published on January 19, 2021.
 The S&P 500 gained 16% in 2020, but since our picks are published over the course of the year, we measure performance of our picks against the S&P 500 at the publication dates, not the beginning of the year.
 Our reports utilize our Core Earnings, a superior measure of profits, as demonstrated in Core Earnings: New Data & Evidence, a paper by professors at Harvard Business School (HBS) & MIT Sloan. Recently accepted by the Journal of Financial Economics, the paper proves that our data is superior to all the metrics offered elsewhere.
 Performance measured from Casper’s opening price of $14.50/share on February 6, 2020.
 Teradata provides both traditional data warehousing and business intelligence and analytics services. Prescient & Strategic Intelligence expects the global data warehouse as a service market to reach $10.9 billion by 2027. Coherent Market Insights expects the business intelligence and analytics market to reach $55.2 billion by 2027. We combine these two outlooks to arrive at the 2027 total addressable market (TAM) of $66.1 billion.
 Performance measured from DoorDash’s opening price of $182/share on December 9, 2020.
Disclosure: New Constructs
Disclosure: David Trainer, Kyle Guske II, Sam McBride, Matt Shuler, Alex Sword, and Andrew Gallagher receive no compensation to write about any specific stock, style, or theme.
About New Constructs
New Constructs leverages cutting-edge Robo-Analyst technology to provide insights and diligence on stocks, ETFs, mutual funds & debt issuers. Highly-respected public and private institutions believe in our concepts::
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