Roger and ALL: Some intersting short ideas but be careful some of this are sacks strong buys/buys. However some are extremely overpriced and/or dogs. Any input from the experts (CalculatedRisk Bill take a shot at it). I started from the bottom of the list and so far USF looks interesting. This is from thestree.com my apologies to Cramer. I hope some of you like it and will subscribe.
In the end, the short-selling screen I developed using criteria culled from Gary B.Smith's technical analysis articles just looked more interesting. (Smith writes Monday's Technician's Take for TSC.)
Although the following screen doesn't anticipate the first move down, it does serve to highlight companies with growing selling pressure. We should consider getting short, because the holders of these names are now considering getting out. The screen's criteria are:
Price drop yesterday of more than $1.
Volume yesterday 50% higher than the 20-day average.
Price closed yesterday below the 50-day moving average.
Market capitalization greater than $500 million.
Stock still within the top half of its two-year price range. I added this last criterion because I wanted to avoid recommending the short sale of deeply depressed stocks.
Potential Near-Term Short Sales
11/03 11/03 Est MktCap
Tkr Description Price Chg P/E ($Mill)
BSN BOSTON TECHNOLOGY INC 25.88 -1.25 21.2 706
CMVT COMVERSE TECHNOLOGY INC 39.81 -1.44 21.1 1,001
CSL CARLISLE COS INC buy 41.88 -1.38 16.8 1,262
EFII ELECTRONICS FOR IMAGING 45.63 -1.13 21.7 2,366
FJ FORT JAMES CORP 38.63 -1.06 15.1 7,291
IIXC IXC COMMUNICATIONS INC 31.25 -1.75 99.0 966
NATI NATIONAL INSTRS CORP 42.63 -2.88 24.1 924
SNS SUNDSTRAND CORP 51.88 -2.50 15.1 3,085
USF UNITED STATES FILTER C. 37.13 -3.00 24.6 3,076
Developing a Short-Sale Screen
It is much harder to develop quantitative criteria to spot short-sale candidates than it is to develop useful screens for the buy side.
None of the hundreds of backtests I've run based on earnings momentum, earnings revisions or various valuation measures have resulted in a useful strategy for actually making money on the short side. Many of these criteria seem to yield underperforming portfolios, but you'd still have lost money selling the companies short.
It seems that negative information is priced into stocks too quickly and aggressively for quantitative criteria based on earnings estimates to be helpful. Short selling due to high valuations, on the other hand, fails when the seemingly overvalued companies proceed to grow faster than the consensus.
Turning to Technical Analysis
In the end, it's a timing issue. People who own stocks follow them closely, and they are likely to be on top of any negative trends or news announcements. By the time negative news works its way into earnings estimates, the damage is done.
Although not anticipatory, price and volume data are timely, and the technical screen listed above provides useful names for further research.
Ted Murphy (ted@pdgm.com) operates the MarketPlayer Web site. Prior to MarketPlayer, he was a partner at Equinox Capital Management.
Regards to all
Pancho |
