Finding stocks to buy has become increasingly difficult as the market has rocketed higher. Intrepid investors might want to look at stocks to short, or bet against, instead.
Investors could make money from those potential drops with short positions, which profit from a stock’s decline. In a successful short bet, an investor borrows someone else’s shares and immediately sells them. After the stock falls, they buy the shares back at a lower price and return them to generate a profit.
This week, analysts at Wolfe Research published a screen of stocks that look like good short candidates. The screen included names with valuations that are arguably too high relative to the companies’ earnings potential. Consistent with that, the stocks had to have poor earnings quality, or a low predictability of earnings.Current market positioning for these six suggests they could see more short selling in particular.
The company’s net debt is also about three times expected Ebitda for 2024, a larger multiple than that of the S&P 500.