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Tuesday, May 26, 2009

Seven signs you should short sell a stock

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These are not the only signs, just a few examples of when to bet against a company, all of which would have worked out great over the past year:

1. Right when management admits a massive fraud over many years, Satyam Computer Services (SAY)

2. Companies lie about the health of management: Apple Inc. (NASDAQ: AAPL)

3. Arrogance and greed blinds management to excessive risk-taking: General Electric Co. (NYSE: GE), Citigroup (NYSE: C), Morgan Stanley (NYSE: MS), Bank of America (NYSE: BAC), General Motors Corp. (NYSE: GM)-pick an over-leveraged financial, any financial...and yes, considering all the messy financial instruments these companies took on, they are all financial stocks.

4. Excessive internet company valuation: Google Inc (NASDAQ: GOOG), Priceline.com (NASDAQ: PCLN), Amazon.com Inc. (NASDAQ: AMZN)

5. Over-aggressive product marketing: Vistaprint Ltd. (NASDAQ: VPRT), Baidu Inc. (NASDAQ: BIDU), China Finance Online Co. (NASDAQ: JRJC)

6. Being the Nasdaq's top annual performer : Travelzoo Inc. (NASDAQ: TZOO), Dell Inc. (NASDAQ: DELL), Hansen Natural (NASDAQ: HANS), Taser International (NASDAQ: TASR) and Nutri Systems (NASDAQ: NTRI).

7. Excessive commodity price runups: Schlumberger Ltd. (NYSE: SLB), Chevron Corp. (NYSE: CVX), NGAS Resources (NASDAQ: NGAS)

And bonus sign--when you think the overall market will tank, because as most of us need to realize--you can make all the assumptions based on all the research you can dig up, but in the end, three out of four stocks follow the market.

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