Doom and Gloom: 9 Stocks That Everyone's Dumping

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(Written by Rebecca Lipman. List compiled by Eben Esterhuizen, CFAInstitutional data sourced from Fidelity, short data from Yahoo! Finance.)

Economist David Rosenberg, known for his early predictions of the housing and credit bubbles as well as their prolonged effects on the economy, recently took to the airwaves to discuss his (grim) outlook for the US economy.

Rosenberg, who is Chief Economist and Strategist of Gluskin Sheff and former Chief North American Economist at Merrill Lynch, joined Consuelo Mack on Wealth Track to discuss his theory that we are 4 years into a depression that will likely last between 7 and 10 years.

Unlike most economists, Rosenberg feels validated in his use of the word “depression” over the more choice term, “recession.” He says a recession generally implies a contraction in the economy in the context of an expansion in credit, which is what we’ve been accustomed to for the better part of the past 50 years. What we’re seeing now is something different.

 

The Depression

Rosenberg theorizes that the US economy is in a depression state similar to what Japan has suffered in the past 20 years, seeing a secular contraction of credit. He also says the economy will begin contracting again in 2012 along with deteriorating employment and GDP growth levels.

“He bases this view on the idea that de-leveraging tends to coincide during a prolonged period of economic weakness that is not merely consistent with recession,” says Cullen Roche of Pragmatic Capitalism.

As evidence, he points out that the S&P is at the same level it was twelve years ago and that the US has experienced a decade worth of zero employment growth. Furthermore, there is an increasing number of economists, including the Federal Reserve, lowering their forecasts and predicting several more years of high unemployment, low interest rates, and slow economic growth.

The money market outlook is extremely fragile, he notes, but it doesn’t mean we’re going to continuously backslide into recession, just that this is an elongated period of very weak economic growth coming off the credit bubble that burst four years ago.

 

Investing Ideas

So, which companies are expected to see the biggest declines during this economic downturn?

For ideas we collected data on short seller trends, and identified a list of names that are being targeted by short sellers.

In addition, all of these companies have seen significant institutional selling during the current quarter.
Sophisticated investors, like short sellers and hedge funds, think there is significant downside to these names. And considering Rosenberg’s bearish view on the economy, these stocks may remain weak for quite some time.

Do you agree with this extreme pessimism? Use this list as a starting point for your own analysis.

Analyze These Ideas (Tools Will Open In A New Window)

1. Access a thorough description of all companies mentioned
2. Compare analyst ratings for all stocks mentioned below
3. Visualize annual returns for all stocks mentioned

1. LDK Solar Co., Ltd. (LDK): Engages in the design, development, manufacture, and marketing of photovoltaic (PV) products; and development of power plant projects. Short float at 20.30%, which is equivalent to 10.63 days of average volume. Net institutional sales in the current quarter at -6.3M shares, which represents about 9.25% of the company's float of 68.09M shares. Shares shorted have increased from 27.62M to 31.68M over the last month, an increase which represents about 5.96% of the company's float of 68.09M shares.

2. Express Scripts Inc. (ESRX): Provides a range of pharmacy benefit management (PBM) services in North America. Short float at 16.01%, which is equivalent to 8.89 days of average volume. Net institutional sales in the current quarter at -20.6M shares, which represents about 4.27% of the company's float of 482.70M shares. Shares shorted have increased from 69.16M to 75.50M over the last month, an increase which represents about 1.31% of the company's float of 482.70M shares.

3. Barnes & Noble, Inc. (BKS): Operates as a content, commerce, and technology company in the United States. Short float at 31.65%, which is equivalent to 8.6 days of average volume. Net institutional sales in the current quarter at -3.9M shares, which represents about 14.48% of the company's float of 26.94M shares. Shares shorted have increased from 8.63M to 9.32M over the last month, an increase which represents about 2.56% of the company's float of 26.94M shares.

4. Comstock Resources Inc. (CRK): Engages in the acquisition, development, production, and exploration of oil and natural gas properties in the United States. Short float at 24.42%, which is equivalent to 8.17 days of average volume. Net institutional sales in the current quarter at -1.8M shares, which represents about 4.26% of the company's float of 42.22M shares. Shares shorted have increased from 10.23M to 10.91M over the last month, an increase which represents about 1.61% of the company's float of 42.22M shares.

5. Coinstar Inc. (CSTR): Provides automated retail solutions primarily in the United States, Canada, Puerto Rico, the United Kingdom, and Ireland. Short float at 32.24%, which is equivalent to 7.99 days of average volume. Net institutional sales in the current quarter at -920.9K shares, which represents about 3.44% of the company's float of 26.76M shares. Shares shorted have increased from 11.13M to 11.43M over the last month, an increase which represents about 1.12% of the company's float of 26.76M shares.

6. Tempur Pedic International Inc. (TPX): Distributes bedding products worldwide. Short float at 19.01%, which is equivalent to 6.79 days of average volume. Net institutional sales in the current quarter at -2.8M shares, which represents about 4.65% of the company's float of 60.25M shares. Shares shorted have increased from 8.54M to 11.35M over the last month, an increase which represents about 4.66% of the company's float of 60.25M shares.

7. Leap Wireless International Inc. (LEAP): Provides digital wireless services under the 'Cricket' brand name in the United States. Short float at 16.73%, which is equivalent to 5.85 days of average volume. Net institutional sales in the current quarter at -8.7M shares, which represents about 17.83% of the company's float of 48.80M shares. Shares shorted have increased from 12.35M to 13.51M over the last month, an increase which represents about 2.38% of the company's float of 48.80M shares.

8. Frontline Ltd. (FRO): Engages in the ownership and operation of oil tankers and oil/bulk/ore (OBO) carriers. Short float at 24.74%, which is equivalent to 5.33 days of average volume. Net institutional sales in the current quarter at -4.8M shares, which represents about 9.32% of the company's float of 51.52M shares. Shares shorted have increased from 11.59M to 12.23M over the last month, an increase which represents about 1.24% of the company's float of 51.52M shares.

9. Dillard's Inc. (DDS): Operates as an apparel and home furnishing retailer in the United States. Short float at 18.53%, which is equivalent to 4.36 days of average volume. Net institutional sales in the current quarter at -2.6M shares, which represents about 8.61% of the company's float of 30.19M shares. Shares shorted have increased from 6.58M to 7.00M over the last month, an increase which represents about 1.39% of the company's float of 30.19M shares 



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Investing Ideas , Stocks , US Markets


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