Filed Under: ,
Tickers in this Article: ACMR, AIG, HMA, NVTL, PSUN, JAS
The typical way individual investors attempt to grow their savings in the stock market is by buying and holding common stocks over long periods of time. The problem is that a long-only investment strategy can only profit by making trades on stocks that increase in price. They've lost the opportunity to profit from stocks that decrease in price.

In order to maximize their profit potential, savvy investors know to search not only for attractive long positions to enter in to, but potentially lucrative short-selling opportunities as well. During bear markets, this advantage can prove critical and can go a long way to helping you beat the market.(To learn more, check out Investopedia's Short Selling Tutorial.)

Your Five High Short Stack
As a general rule, stocks that have already been trending significantly downward over a one-month period of time, and are expected to produce negative EPS growth for the current year are good places to start looking for short sale candidates. Here are five stocks that fit that bill:

Company Est. Annual EPS Growth* 4-Week Price Change**
A.C. Moore
-135.71% -11.67%
-110.15% -17.71%
Health Management Associates
-29.07% -9.83%
Novatel Wireless
-62.56% -35.57%
Pacific Sunwear
-69.72% -23.58%
*Current fiscal year\'s estimate vs previous year.
** From August 4 close to September 2 close

AC Moore Lost in the Crowd
I shop at AC Moore Arts & Crafts stores from time-to-time, usually for my kids when a last-minute school project pops up, but I have no interest in buying the stock at this point.

I just don't see anything special about this company. If I wanted to, I could buy similar supplies (not everything to be sure) at Michaels or Jo-Ann Stores (NYSE:JAS). The only thing that keeps me coming back now is store location, and that's just luck on AC Moore's part. It's not like the company is the Starbucks of craft stores.

Beyond AC Moore's simple lack of uniqueness, I'm not crazy about its recent second quarter financial results. For the period ended June 30, the company reported a loss of 21 cents per share versus a loss of 3 cents per share in the comparable period last year. It also posted a same-store-sales drop of 4.8%.

At present AC Moore is expected to lose 8 cents per share this year and have earnings per share of 43 cents in 2009, according to Yahoo FInance. That's not too sharp in my book given that last year it reported a 19-cent per-share gain, or given that the stock currently trades at over $7 a pop. (To learn more, read Assess Shareholder Wealth With EPS.)

Insider Buying a Positive
I could be wrong in my dislike for the AC Moore; company insiders certainly seem to like its prospects. In late May of this year, insiders bought 19,000 shares around $7.00. Rick Lepley (CEO), Michael Joyce (director) and Joseph Coradino (director) each bought 5,000 shares. Neil Mclachlan (director) purchased 4000 shares.

Are these stocks worthy of selling short? Be sure to join in the FREE Stock Picking Community to share your thoughts and see what other investors are saying.

comments powered by Disqus

Trading Center