Something dramatic happened in the past 2 days: fundamentals came back with a thud, quite literally, for those momo traders who believe that they can always top tick a stock and sell just before it. Instead now they are caught in a toxic spiral of doubt when to take profits, hoping for a return to previous highs, even as stocks continue to descend ever lower. Of course, it is preposterous to assume that the Fed will allow a return to full normalcy: as we have written since oil passed $90, this is merely the Fed's ploy to kill the surge in commodity prices. Soon enough, WTI will get back to levels that are acceptable to the Fed, at which point the whole reflation trade will start grinding higher again one more time. In the meantime, the "normalcy return" could last one day, one month, or more. Additionally, keep in mind that the Fed will have to create an "unexpected event" ahead of June, which will be the trigger for QE2+, which leads us to believe that there will be at least two pronounced major distribution events: the current correction, and the next, and far more potent one, before the end of Q2. As such, we will once again commence looking at securities in a way that makes sense from a fundamental basis (as opposed to buy because it is green). Below, in our first foray back into normalcy after a long absence, we present the most hated stock in the world: these are the 28 names on the Fed favorite Russell 2000 which have a short interest as a percentage of float of more than 30%. They are hated with a passion, and for good reason. That said, in times when the Fed steps back from the limelight, these are the companies that should likely trade alongside a dropping market. Alternatively, due to their high beta nature, they will likely surge as soon as the Fed decides the break from executing its third mandate (and the populations of developing nations) is over.
The 28 names charted:
Granular level data on the same names:
Next up, we will look at the biggest beta outlier companies.