What are the best stocks to short today? This is a question people will not usually ask during a day of trading. Most investors concentrate on which stock to add to their long portfolio. But when you have a strong feeling that the market is topping out, sometimes you have to step back from all those long positions and add a few shorts in there for proper diversification. I have found that it can be much easier to find a stock that will drop more than it is to find the next Google or Apple. With this being said, let’s get to finding our best stocks to short today and start making some money.
I want to explain a few things that I try to look for when figuring out what stock is ready to be shorted. You will want to concentrate on those companies that are in trouble. Make sure to focus on companies that have a negative earnings per share. This tells us that the company is bleeding cash and not earning money for their stockholders. I love looking at their last 4 quarters and seeing a year to year drop in revenue as well. This gives us a great clue into how the business is faring. (Absolutely horrible, if we are shorting the right stock) It also helps when you find all the above and couple it with a few downgrades from the street. If you have been following my articles and stock selections, then you know that I love to short stocks that have had a big announcement and the price goes up about 40% or more in a single trading day. Add that with all of the other parts, and you have yourself a winner. Stick to shorting stocks that super high valuations and you can’t go wrong. You should also concentrate on finding stocks that the large mutual funds are staying away from. There have been studies that show that these type of stocks have under-performed the markets by a large amount. Now that we have put a few of aspects that we should be looking for in order to short a stock successfully, let’s go out and find a few.
- The first stock that makes the list for best stock to short today is Diamond Offshore Drilling Inc. (DO $.83). They are in an industry that is getting decimated by a glut of oil from all over the world. They are losing $2.00 a share for stockholders and we know that companies can’t last forever without turning a profit. This stock was trading at $143 a share a few years ago, but is now just a sliver of it’s former price. Analysts have a mean price target for this stock at $19.09 back in the day. It seems that it is hitting all the right news for us to jump on the shorting train. To add to the misery, it has fallen about 25% over the last year, while the market was testing new highs. Does this seem like a company on the way up? And with oil prices looking to stay low for a while, things could get much worse before they get better.
- The second stock that makes the list for best stocks to short today is Teradata Corporation (TDC $20.53). It fits many of the main things we look for in a great shorting opportunity. Teradata is losing $1.54 a share for stockholders and things look bleak for the near future. This is all about earnings for this pick. They are not cutting it and now is the time to take advantage of that. They are down 44.96% in the last 12 months to boot. This is not the kind of play I look to add to my long positions, it is a good old fashion short.
- The third stock that makes the list for best stocks to short today is PTC Therapeutics, Inc. (PTCT $47.46). I have written about this stock in a previous article regarding its recent takeoff of over 43% in a single day. This is a company that is losing over $5.00 a share for stockholders and, though they have had some positive information being released, doesn’t look to be turning a profit in the near future. This is the kind of play that can make a quick double digit gain in a matter of hours. This one is a very high risk play and one that is all about timing. I see this being a short term short, with the long term looking better for the bulls. But for the next few days, we have ourselves a good short to cash in on.
- The fourth stock that makes the list for best stocks to short today is Tesla (TSLA $1592.33). This is a stock that has an army of followers and that is what makes this stock a tough call. The problem is that it hits all the sweet spots for me to short it. It is losing money hand over fist. They consistently miss their deadliness for production and the latest “good” news lead to a short term rally, which gives us a great chance to short it. I have written an article about Tesla in detail here, for those looking for more details about this possible short.
- The Fifth and final stock that makes the list for best stocks to short today is SeaDrill Ltd. (SDRL $.51). This is one of those stocks that has a ton of risk with it. It has risen in the last 5 days. Oil has made a run up and SDRL is enjoying the benefits from that. The face remains that oil is not going to keep rolling up in price and that is what SeaDrill needs to stop the bleeding. We have Russia, Saudi Arabia, and Iran meeting tomorrow to discuss a possible deal to raise prices. If they come to some kind of production freeze, or even worse, a production cut, you will see this stock go up a boatload. If no deal is made, then oil prices could drop once again and SDRL will take the brunt of the damage with share prices dropping tremendously. The company is losing $1.49 a share for stockholders and their books are looking tough as of late. If oil prices drop, expect this stock to lose all the gains from last week and some.
This is just a small sample of possible plays for the next few months. If the market starts to crash, you can bet that these stocks will be taking huge hits and their share prices will show this. If you are curious about some of the other shorts that have been discussed, take a look at some of the previous articles below. You will see that they were very successful and brought in a substantial amount of gains for all of us.