A Screen for Stocks to Short
2008 has had its share of upward moving stocks, but there is a lopsided amount of stocks that have gone sharply lower. With the market teetering on another potential leg down, we might see more of the same.
And while I'm always looking for stocks to buy (yes, there still are good stocks to buy), I've also been looking for stocks to short.
And with the trend being down, trading with the trend can be your friend.
So, if you think a stock is over-priced and over-valued, you can sell it and make money as it falls.
(For those who don't want to sell short (or can't because they're trading in a qualified account), you might also consider buying put options instead. It's a fine alternative to attempt making money as the price of a stock goes down. Just be smart about the options you buy. Personally, I like buying in-the-money options with good deltas.)
Short Screen
The screen I'm running this week is essentially looking for overvalued companies with underperforming growth projections.
- Price >= 30
(I'm putting a price minimum on these stocks because I personally don't like shorting stocks too cheap in price.) - Average 20 Day Volume >= 100,000
(The volume minimum makes sure that there's at least a fair amount of trade activity each day. And if you multiply the minimum price by the minimum volume, this shows that there's at least $3 million dollars worth of shares traded on a daily basis, meaning there should be no problem getting in and out.) - Projected Growth Rate F(1)/F(0)
(This puts companies in the bottom half of their Industry on an underperforming radar screen.)
- P/E using F(1) Estimate > Median for its Industry
(These companies' valuations are also on the higher end for their Industry.) - Debt/Equity Ratio > Median for its Industry
(This shows how much of a company's assets are financed thru debt. The bigger the number, the more debt financing it has. As debt becomes harder to come by along with tougher pricing, companies relying too much on debt are more vulnerable.) - % Change in F(1) Earnings Estimates (last 12 weeks)
(This screen is topped off by looking for those companies with earnings estimates that have been lowered over the last 12 weeks – further darkening the future prospects for these companies.
Here are 5 stocks that made it thru this week's short sale screen.
ACS - Analyst Report Affiliated Computer Sciences, Inc.
APD - Snapshot Report Air Products and Chemicals, Inc.
CNQ - Analyst Report Canadian Natural Resources, Ltd.
PVA - Snapshot Report Penn Virginia, Corp.
SWK - Snapshot Report The Stanley Works
Get the rest of the stocks on this list and start screening for your own short selling candidates. And start preparing for your longs as well because this bear market isn't going to last forever. Get started today and put your ideas to the test. You can do it. Sign up now for your free trial to the Research Wizard and start making better decisions today.
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Disclosure: Officers, directors and/or employees of Zacks Investment Research may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material. An affiliated investment advisory firm may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material.