Slump in oil price hits WOR, page-47

'Short sellers are like financial detectives, they hunt around for corruption and decay, and then back their sense of smell, by putting their money on the line.'

Not a bad way of putting it. I start with Top-Down analysis. eg Commodity prices are falling due to massive world over production/supply. Then ask:
a) Is this likely to change soon?
b) If so will rate of change be fast, moderate or slow.
This determines level of risk.

Take LNG. Price has halved over past 3 yrs. Supply exceeds demand PLUS massive new supply coming online over next 3-12 months. Hence, oversupply situation... short of war... is unlikely to be alliviated for yrs.

Part 2.
Look for companies that have an over-reliance of LNG price. Several come to mind.... ORG, STO, OSH, WPL as producers and WOR, MND as MS engineers.

Part 3.
Bottom up analysis. Look at financial health of company esp free cash flow and level of debt. Although interest rates are low,if there is little/zero FCF then debt has to be serviced by other means eg CR. This always dilutes the SP.

MND has diversified into water, infra-structure, maintenace etc. But in WOR's case it is waaay over dependent on strong commodity prices esp oil&gas. Many mega projects have been postponed/cancelled... hence future income under serious stress. Hence very unlikely SP can prevent from falling.

Result: A low risk/high reward play. Having said the above on multiple occasions going back 3 yrs on HC I've said short selling should be restricted to ASX100 or maybe a few more stks. Without doubt it can destroy small caps.

Re WOR: Avoid. Now well under $8.00 and still looking weak. Unlikely to recover anytime soon.