The typical way individual investors attempt to grow their savings in the stock market is by buying and holding common stocks over long periods of time. Indeed, there exists large profit to be made for diligent investors who regularly scan the market looking for undervalued stocks to buy up on the cheap and then hold in expectation of substantial share price increases.
However, investors who follow a long-only investment strategy can only profit making trades on stocks that increase in price. They've lost the opportunity to profit from stocks that decrease in price.
Don't Sell Your Returns Short
In order to maximize profit potential, savvy investors know to search not only for attractive long positions to enter in to, but potentially lucrative short-selling opportunities as well. During bear markets this advantage can prove critical and can go a long way to helping you beat the market. (To learn more, check out Short Selling Tutorial.)
Wednesday Morning Short Stack
As a general rule of thumb, stocks that have already been trending significantly downward over a one-month period of time, and are expected to produce negative earnings per share (EPS) growth for the current year are good places to start looking for short sale candidates. Here are five stocks that fit that bill:
| Company |
Est. Annual EPS Growth* |
4-Week Price Change |
E.W. Scripps
(NYSE:SSP) |
-74.75% |
-17.61% |
Goldman Sachs
(NYSE:GS) |
-34.56% |
-10.75% |
Lehman Brothers
(NYSE:LEH) |
-154.18% |
-15.39% |
Ryanair
(Nasdaq:RYAAY) |
-72.59% |
-21.02% |
Winn Dixie Stores
(Nasdaq:WINN) |
-48.15% |
-10.03% |
| *Current fiscal year's estimate vs. previous year. Data as of market close August 15, 2008 |
Ryanair Holdings
I am generally not a bull when it comes to the airlines. It seems they're always struggling for one reason or another whether its government regulation, a lack of consumer spending, competition, or high commodity costs. When it comes to Ryanair, I find its cheap flights attractive, but over the long haul I doubt it will be able to effectively compete with the big boys.
Ryanair is based in Ireland and does offer some attractive flights throughout Europe. It's also made it this far despite the vast increases in fuel prices over the past year. However, if the economy remains in the tank for an extended period of time and/or fuel prices remain at lofty levels, I have to wonder where the stock can go from here. (Read more on evaluating airline stocks in Is That Airline Ready For Lift-Off?)
At present, Wall Street is expecting the company to have earnings per share of 32 cents in the current fiscal year and 97 cents a share in 2009. Hold the email Ryanair bulls, I understand that's a pretty decent rate of expected growth; however, for a stock that currently trades at over $25, I'm not impressed. I'm also concerned about the potential for some pretty hefty tax-loss selling near year end.
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