Why did EquNev-K1t Capital Hedge Fund Short Amazon based on the signals given by our algorithms Kapil Khandelwal QuoteUnquote with KK www.kapilkhandelwal.com

1. Why is this Indian Hedge fund going short on Amazon?
At a price of $844 per share and above, Amazon's market capitalisation is over US $ 400 billion
Kapil Khandelwal October 15, 2016 Last Updated at 17:21 IST
In Mid-June 2016, we called out our position on Amazon. We did short the shares of Amazon based on the signals
generated by our Algorithms. Lets understand a few basics of Amazon stock on the bourses. At a price of $844 per
share and above, Amazon's market capitalisation is over US $ 400 billion. Compared to Walmart its peer in brick and
mortar, its revenues are one-fourth of Walmart (Amazon's revenues also includes the revenues from cloud and other
tech infrastructure services apart from ecommerce). While the metrics for valuation of an ecommerce is vaguely
different from its peers in brick and mortar space, it is definitely not comparing apples and oranges.
Amazon trades at trailing PE ratio of 210 as compared to Walmart at 14. There is a huge difference in the profits and
losses both the companies Amazon and Walmart generate. Next year Amazon will have completed 20 years on its
listing on the bourses. Hence it is definitely not a start up.
Our Short of Amazon in June 2016
When we had initially shorted Amazon in mid-June 2016, the global ecommerce scenario was a bleak with several
mark downs in valuations of several ecommerce companies, not only in the US but closer home with Flipkart,
Snapdeal.
While on a flight
back from San
Francisco, I met up
with Kunal and
Rohit, the co-
founders of
Snapdeal in the
Eithad Lounge.
While their mood
down on a different
set of reasons which
is not relevant for
the discussion here,
I did discuss on our
going short on
Amazon and our
outlook on
ecommerce stocks.
Rohit was clear that
the they and the
ecommerce sector
will bounce back
within 6 months. He
had different set of
reasons why the
investors will come back to ecommerce. My point for going short on Amazon was completely different. Amazon has
come off its peak in mid-June 2016. Amazon has traded above Point C for only 30 minutes in the last 10 days in June
2016. Our justification on calling a sell signal on Amazon was justified as shown below. A Fibonacci Ratio as well on
the historical price performance of the stock.

2. Inspire Brexit and
other fears, the
markets were still
on a run and so was
Amazon stock in
July and August
2016. We had to
cover our shorts and
the Amazon stock
rallied. Post-Brexit,
we called for a
sharp correction in
the markets on 27
July 2016.
While we waited for
the markets to
correct, in August
2016 all the indices
rallied to touch their
all-time highs
together, a
phenomena that was witnessed in 1999, pre dot.com bust. Amazon stock also followed the market trend. When the
markets corrected on 9 September 2016, we have once again picked up extremely strong sell signals on Amazon
through out September 2016.
As the Amazon
stock rallied over
$847, we triggered a
short on Amazon.
There is a wide
consensus amongst
many hedge fund
analysts and stock
market analysts that
the Amazon stock
has peaked off.
Only time will say
how the stock
performs. Our
Algorithms have
proved the market
correction of 9
September 2016
correct which we
predicted on 27 July
2016. We will
continue to gain
from the signals our
algos are providing
us to gain profits for
our investors.
Let's wait and
watch! We may
prove correct on our
call on Amazon this
time round.

3. ________________________________________________________________________________________________
The author is director, EquNev-K1T Capital Hedge Fund, a US equity market-focused Indian hedge fund