INTRODUCTION

On recent trips to the local supermarket you begin to notice that the cost of the shopping appears to be getting a little more expensive. Friends have been talking about a new store that has opened a few suburbs away and so you decide to visit it the next time. To your surprise, not only is it substantially cheaper but the quality is also pretty good. This story has been slowly playing out across Australia over the last decade to the point that the company eventually announced to investors that it

could no longer be as profitable as everyone expected. This is the story of Woolworth’s fall from grace.

This is the tale of a cozy duopoly that for a long time was great for investors but was slowly changing, one person at a time. We all have heard of the idea that if you like the product you should buy shares in that company, but what about another approach? That is, if the product is letting you down, how do you profit from that? This is where short selling comes in. It is a way for investors to “invest” in the poorly run or expensive companies they see around them.