Friday, November 30, 2012

13 underperformers targeted by shorts

Contrarian investing is a strategy that a number of managers agree should produce superior returns. By buying stocks that trade at low valuations, and avoiding stocks that have been bid up by the market, investors generally have less room to lose money, but can stand to gain substantially if the market's judgment of low-valued companies changes.

Unfortunately, contrarian investing is psychologically difficult. Investors often must look at a stock chart that shows a 60% decline, or even higher, and ignore any pattern-recognition skills that tell them that the price is going to decrease further. Much of the discussion of the stock may come from short-sellers, who have earned high returns from the stock's decline and have seen their investment thesis justified.

Using Fidelity's market data, we conducted a screen for these bold contrarian picks. Each stock has at least a $2 billion market cap, a short interest of at least 5%, and a stock performance on a trailing 52-week basis that is in the 20th percentile of the market or lower.

Green Mountain Coffee RoastersGMCR

Market Cap: $2.7B; Short %: 19%; 52-week return: -81%

NetflixNFLX

Market Cap: $4.5B; Short %: 22%; 52-week return: -71%

Research In MotionRIMM

Market Cap: $3.6B; Short %: 18%; 52-week return: -74%

United States SteelX

Market Cap: $2.6B; Short %: 24%; 52-week return: -59%

SinaSINA

Market Cap: $3.0B; Short %: 10%; 52-week return: -60%

Ultra PetroleumUPL

Market Cap: $3.4B; Short %: 13%; 52-week return: -53%

No comments:

Post a Comment