Crooks, Crazies & Short Sellers
We hosted Herb Greenberg on Kuppy’s Happy Hour, and it was a great success, with many of you dialing in live to ask Herb your questions.
We subscribe to Herb Greenberg | On the Street, where he publishes red-flag alerts on dozens of companies that grow earnings through accounting ingenuity rather than sound underlying business practices.
Herb can also be found on Twitter / X, so make sure to follow him.
We are currently getting the video edited and will publish it on our website soon. In the meantime, please find our (AI-assisted) summary of the call below.
Frauds and Red Flags
Herb has spent decades looking for companies where something doesn’t add up. That doesn’t necessarily mean fraud. Sometimes it’s aggressive accounting, promotional management, or simply a bad business with a great story.
As Herb puts it, “The difference between a visionary and a fraud is the ability to get financing.”
Carvana (CVNA) is a good example. A few years ago, it looked like the company might run out of money, with Herb joking that its car vending machines could become trampoline parks or indoor skydiving towers. Instead, the stock recovered and access to capital reopened. Being right about a questionable business doesn’t help much if it can keep financing itself.
Herb also watches what management stops telling investors. A disappearing KPI, a canceled quarterly presentation, or a quietly altered slide can be more revealing than what management discloses. Compensation metrics are another tell: if management gets paid on Metric X and then quietly removes Metric X from the incentive plan, Metric X may not be doing so well.
Kuppy pointed out that the reverse can also work. One of our favorite KEDM screens looks for beaten-down SMID caps that haven’t held an analyst day in years and suddenly decide to hold one. If every senior VP suddenly wants to fly investors in and buy them a steak, perhaps they finally have something good to talk about.
Herb also highlighted Vital Farms (VITL), where a great brand eventually ran into the realities of selling eggs. Premium positioning and shortages helped produce attractive margins, but those margins inevitably attracted competition from Costco and others. As Herb put it, “eggs are eggs.”
Roll-Ups
Herb has followed roll-ups for decades and has a simple observation: eventually, they all reset. The danger comes when acquisition targets run out, but the company still needs M&A to keep growing. Stericycle (formerly SRCL) rolled up medical waste before wandering into document shredding, which didn’t work particularly well.
Brown & Brown (BRO) has historically been different, with a huge universe of insurance brokers to acquire, meaningful management ownership and continued founding-family involvement.
Then there is QXO (QXO). Brad Jacobs skipped the small acquisitions and went straight for multi-billion-dollar businesses, repeatedly raising his bids. Kuppy’s description of Beacon Roofing: “This man’s crazy. We’ll sell it to him.”
The concerns are dilution, acquisition prices and a lousy housing market. The problem with betting against Jacobs is that he always seems to win. “I can’t really understand the strategy because the pieces don’t really fit together, but he always wins.”
Finally, GFL Environmental (GFL) is one of the wildest stories Herb has followed. The Canadian waste roll-up has spent years attracting equally committed longs and shorts, with the latter repeatedly getting blown up. Management even moved its executive headquarters from Toronto to Miami Beach, explicitly to broaden eligibility for U.S. indices. It subsequently joined the Russell 1000 and Russell 3000 in June.
Now the story may end with a sale. GFL is reportedly considering a take-private after receiving interest from several buyout firms, although its roughly $7 billion of debt complicates a deal. Herb said he believes management wants to sell around $50 and has heard there may really be only one serious bidder, potentially one of its private-equity backers. He readily admitted he could be wrong. His somewhat contradictory conclusion: “I would say avoid GFL… but go long it if you’re speculative.”
AI
Herb uses AI extensively to search transcripts, compare management language and spot changes across quarters. He often runs the same question through several models, but always checks the source.
Kuppy learned why when Grok confidently produced a Congressional bill relevant to his research. The bill, including its bill number, was completely made up.
Herb likes Tenzing Memo, Quartr and AlphaSense, but worries that younger analysts are outsourcing too much of the actual work. Kuppy calls it the “Claudification of finance.” If AI does all the research, what exactly is the analyst learning?
Bubbles and Financing
Asked when the current AI boom ends, Herb’s answer was simple: nobody knows. People were calling the internet bubble a bubble in 1996, but it kept going for years. “They go until they don’t.” And whatever finally ends a bubble is usually something nobody is talking about today.
Herb pointed to Nvidia (NVDA), the flood of capital into AI infrastructure, and private credit. He also cited Oklo (OKLO) and MP Materials (MP) as examples where skepticism hasn’t exactly made for great shorts. In MP’s case, the government simply showed up and took a stake.
Kuppy was similarly skeptical about small modular reactors. “Talk to any adult in the nuclear industry, and they just laugh at it. You would never power your town with 2,000 Generac generators. You just have one power plant.” Whether that matters to the stocks is another question.
The Market Today
Kuppy discussed the increasingly bizarre 20–50% stock moves on relatively small changes in fundamentals. Dick’s Sporting Goods (DKS) was a recent example. Weakness at Foot Locker and Nike (NKE) sent Dick’s sharply lower, even though Nike being a train wreck wasn’t exactly classified information.
The discussion then turned to Nike (NKE) itself. Herb wondered whether a brand that powerful eventually finds its footing. Kuppy was more skeptical. Nike historically had the spending power to sign the best athletes and dominate distribution, but DTC and social media have lowered those barriers. New brands such as On can compete for athletes, while superstars can increasingly launch and market their own products. Kuppy’s concern is that Nike’s brand may simply be worth much less than it used to be.
More broadly, Kuppy blames some of the violent stock moves on market structure. Passive funds don’t step in when something gets cheap, pod shops obsess over the next quarter, and fewer traditional active investors are left to take the other side.
That creates one of Kuppy’s favorite setups: a company where the next few quarters will probably suck, but 2028 looks excellent. Everyone wants to buy two weeks before the inflection. Nobody wants to own it for the year leading up to it.
Kuppy instead typically owns eight to twelve themes and changes only one or two each year. When a stock drops 10% on some pod shop’s latest data run, you investigate whether anything changed. Usually, it didn’t.
The hard part is doing all the research, questioning yourself, chasing every rabbit hole, and then doing nothing: “Stay busy, but don’t trade.”
