Beware when shorting stocks

Beware When
Shorting Stocks
By
www.ProfitableInvestigtips.com

https://profitableinvestingtips.com/profitable-investing-
tips/beware-when-shorting-stocks
Over the course of the longest bull market in
history contrarian investors have again and again
predicted doom and gloom and been burned
again and again. As noted in the movie “The Big
Short,” there are times when shorting a stock can
be immensely profitable.

But, choosing what to short and timing of when
to do it are keys to making money with this
approach. Unfortunately for contrarian investors,
in the last year the “most shorted stocks” went
up as a group more than twenty percent!

So, you should beware of shorting stocks. But,
many shorts in the last year were successful!
How can you profitably pick and choose?

Beware When Shorting Stocks
Market Watch visited the issue of Wall Street’s
most shorted stocks in a recent article.

With U.S. stocks up around 25% so far this year,
it would appear to be have been a tough year for
short sellers. But a breakdown of the most
shorted large-cap stocks indicates Wall Street’s
nabobs of negativity have enjoyed a somewhat
more upbeat story.

In a Tuesday note, analysts at Bespoke
Investment Group observed that Russell 1000
RUI, +0.24% stocks with more than 20% of their
float sold short have seen total returns of 14.81%
so far in 2019.

That’s a solid gain, though it lags the returns of
more than 25% posted by large-cap indexes,
including the S&P 500 SPX, +0.22% , over the
same time. That means shorts “have done OK on
a relative basis,” the analysts wrote.

The least-shorted stocks in the index are up 31%,
so there was some predictive value to looking at
what was being shorted and what wasn’t as a
group. But, within the “shorted” group there
were some big losers! Here are some examples
from the last of stocks that had more than 20% of
their float shorted.

US Steel, -22.68%
Range Resources Corp, -59.50%
Nordstrom Inc., -15.25%
Macy’s Inc., -44.72%
Wayfair Inc., -4.65%

Bluebird Bio Inc., 24.65%
Macerich, -32-97%
AMC Networks Inc., -29.06%
2U Inc., -51.61%
Grubhub Inc., - 44.15%
Sarepta Therapeutics, -0,68%
World Wrestling Entertainment, -18.93

Timing When Picking Stocks to Short
Although we repeatedly remind investors that
fundamental analysis and appraisal of intrinsic
stock value are essential for investing in stocks,
that approach is best used for long term
investing.

The issue when shorting a stock is that you are
borrowing money to buy the stock with the
expectation that you can, rather quickly, buy it
back at a much lower price. A good example is
Match Group which was the most heavily
shorted stock in this list at 59% of its float.

The stock is up 61.37% on the year. But, it is
down 19% in the last three months and 4% in the
last month. If you shorted this stock at the
beginning of 2019 you got burned and if you
shorted it three months ago you are riding high.

In short, you need to stay abreast of market
sentiment and short term factors when shorting
stocks because you cannot afford to hold onto a
short and constantly pay interest for years and
years while you wait for your predictions to
work out.

• How to Pick Stocks to Short
• Those who are successful at shorting stocks
track their target stocks and are fully aware of
the intrinsic value of these investments. Then
they decide what to look for, the trigger, that
will make them short the stock.

Although shorting stocks can be vastly more
profitable than investing in them long term,
timing and appreciation of market sentiment are
crucial factors for success.

For more insights and useful information about
investments and investing, visit
www.ProfitableInvestingTips.com.

Beware when shorting stocks

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Beware when shorting stocks