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Jim Chanos: Best shorts in a bull market

Renowned short-seller Jim Chanos said Thursday he'd continue to bet against Caterpillar and China.

Speaking from the SkyBridge Alternatives Conference in Las Vegas, Nevada, the Kynikos Associates founder revealed his theses behind selling short several high-profile stocks on CNBC's "Halftime Report."

"I think people are generally of a belief that this is a North American construction play. It's 15 percent of their business," he said. "Maybe it's an oil and gas play. Caterpillar is a very diverse company. A big part of their profits are in mining, which continues to decline. The stock is trading above a market multiple for a cyclical company, where even the management has said they think trough earnings could be $3.50. We don't get it."

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Chanos, who has said considered his Caterpillar short his best investment idea of 2013, also noted that the value of mined commodities, such as coal and iron, keep dropping.

China, which has been another favored short for Chanos, was also looking up from a short perspective because of its crackdown on corruption. Most recently, a GlaxoSmithKline executive was charged with bribing hospitals and doctors.

"And the two areas that I think are feeling it right now are luxury goods and real estate. It's one of the reasons real estate transactions have collapsed in China this year," he said. "The next two are flight capital in terms of foreign real estate and art—Sotheby's—and Macau. We're getting increasingly concerned that a crackdown's looming in Macau."

Chanos, who was speaking from the Bellagio Hotel, demurred when asked to expand on his comments.

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"No comment on what we're shorting in Macau. I'm sitting in a casino if you haven't noticed," he said, adding that he was "worried" that U.S. operators were facing real risks from the corruption crackdown.

"We were long corruption, short property in 2010-11," Chanos said. "We would no longer be long the Macau casinos."

In a week that saw record prices at a Christie's contemporary art auction— including the sale of "Popeye," a six-and-a-half-foot-tall Jeff Koons sculpture to casino magnate Steve Wynn for $28.1 million—Chanos saw a clear sign.

"Usually, when the art market starts to get silly, it's time to be out of Sotheby's," he said.

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Chanos downplayed the proxy fight between Sotheby's and Third Point's Dan Loeb, who gained three seats on the company's board and upped his stake to 15 percent. "You can get too wrapped up in personalities and not the actual fundamentals of the company," he said. "What really concerns us is that an awful lot of the action right now is not in artists who are dead, to be blunt. It's in young artists who are still producing a lot of art, and at these prices will produce even more of it."

Chanos also took a short position in Valeant, which has made an unsolicited bid for Botox makerAllergan, in which Chanos has a long position.

"We're short because it's a roll-up, and roll-ups a unique set of problems," he said. "Roll-ups are generally accounting-driven, and we certainly think that's the case in Valeant. We think that Valeant is playing some very aggressive accounting games when they buy companies, write down the assets. … And finally, the only people who are more negative about Valeant than maybe me are Valeant insiders."

Chanos noted that six executives have left in the past 15 months, as well as selling by insiders, including the executive vice-president of corporate and business development.

"I mean, there seems to be not a lot of confidence from inside the Valeant executive suite here," he said. "And that's putting aside the deal dynamics, which is a whole separate story."

Chanos said his short position had little to do with pressure from Allergan shareholder Bill Ackman of Pershing Square to accept Valeant's acquisition bid.

Chanos was also short Keurig Green Mountain and SodaStream, while being long Starbucks.

"Basically, Green Mountain's core business has been slowing for a while," he said. "They had to do a transformational deal. They've done it. I'm not so sure that single-serve cold products are the next wave. I mean, I have carbonated, single-serve cold beverages in my refrigerator, in cans."

Chanos said that insider selling provided support to his reasoning.

"We are seeing a ton of Green Mountain insiders in the last two months unloading stock, the majority of their stock, in many cases," he said. "The head of U.S. marketing just sold a majority of their stock this week. And so, again, you don't have to listen to a short-seller. Look at the executive suite."

Chanos, who had been long FireEye and short Symantec — and profited from both trades, noted that valuations set on small floats were difficult to maintain.

Meanwhile, stocks such as those of Tesla and Netflix were a different story.

"I think both of those are instances where the floats are probably going to continue to increase," Chanos said. "Suffice it to say, I think any stock that is trading in the tens of billions of dollars and being valued on 2020 estimates is pretty much on our radar, and I'll leave it at that."

By CNBC's Bruno J. Navarro. Follow him on Twitter @Bruno_J_Navarro.

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