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The Worst Of The Worst: A Melt-Up Market Special
Now that the market is fully back to its usual melt-up gimmicks, when fundamentals do not matter in the least, and the only potential stock drivers are technicals, which for the market dominating algos typically reduce to such simplistic signals as stock price momentum (and reversion) and short interest as a % of share float, we present our summary of the worst of the worst. The following 40 companies are those names (among the Russell 2000) that have underperformed the market either by a little or a lot, now that the S&P is flat for the year, and which still carry a substantial short interest as a % of the total float (with a 20% of float short minimum). As the charts below demonstrate, one would be hard pressed to find worse companies out there (for pure equity stock pickers; credit analysts would be looking at a completely different set of fundamentals, but as we have repeatedly said fundamentals don't matter in this market, except the market maker number 1's Z.1, H.4.1 and H.3 statements). Which, thanks to bizarro logic, means that a portfolio constructed of these 40 companies will most certainly outperform the broader market by a large percentage. Brownie points if you pick out those companies in this list which have a Neutral or Sell rating by Goldman Sachs - you can bet your bottom FRN that Goldman's prop desk is currently accumulating that particular POS in anticipation of a honestly formulated upgrade by Goldman's sell side time, and the ensuing massive short squeeze rip.
As one can see, the average selection EV/EBITDA is nearly a clot-inducing 19x. And that's excluding the numerous companies that are NM (negative EBITDA). TEVs have a ceiling of roughly $1-2 billion, meaning the companies are small enough for hedge funds to be doing just this kind of short squeeze-in-waiting analysis. One caveat, as quite a few of the stocks have already bounced substantially from their 52 week lows (PALM being a notable exception), despite a deplorable performance YTD, the upside may be at least marginally capped on technicals.
Source: CapitalIQ
Is creating a portfolio out of these 40 names a surefire way to become a Goldmanaire in no time? Under normal circumstances one would have been crucified by the investment community when presenting short squeezes as a catalyst to upside, then again our market is one which takes "normal circumstances" and proceeds to fill it up with KY. This bears repeating: only an idiot would create a portfolio using pure technicals as catalytic events (such as the one above). Then again, keep in mind that one now competes not against human traders, but computers, which are programmed not by financially educated, fundamental-analysis trained analysts, but rather by Ph.D's who swear up and down by databases full of "highly correlating" data and nothing else. As such, positioning for a continued equity melt up will likely mean that the worst will once again become first, as the Fed continues to fornicate with any market rationale, logic and discipline. And with the US itself going all in on a Government Sponsored Fallacy, individual investors may be wise to follow suit, and just hold their collective noses and do the dumbest thing imaginable...
And, for the benefit of those who take any market analysis seriously, we urge a very close rereading of Seth Klarman's financial crisis market lessons...over and over.
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Revlon has 115% of its float short? I honestly did not think that was even possible. Naked short selling at its best.
It's possible to short the same share many times. When it's shorted it's borrowed from the holder 1 and sold to the holder 2, who can lend the share again, etc.
One does have a special gift for hyperbole.
Going long a portfolio of these names is effectively a put on the whole market, since in the event of a huge market sell-off, forced HF liquidation means these names will have to be bought aggressively by the shorts. Long equity is a put. Odd.
This makes true that old line "I'm so low I have to look up to see down".
When bad is good, no one is comfortable.
Might as well go long -
Either they can double the money supply and and "reflate" - or its lights-out cannibalism in the United States.
I think I'll pass on the whole "long-dogshit" trade.
Opportunity cost only hurts egos.
A masterpiece!! Prime example of what we love about ZH!!
But remember that much of the action in these companies will be pair trades - short the stock and long the bonds, what with junk bonds rocketing upward!
It's all about the Bernake rule, - no debt defaults allowed!!
Given how far junk stocks have outperformed and how much money has fled fundamental short, long-short, and market neutral funds, one has to wonder when the worm will turn. leading to junk stocks underperforming and quality stocks outperforming.
Top 5 gainers in the Spooks 500 since the March lows:
Up 671%
Up 695%
Up 829%
Up 915%
Up 1701%
Rabid. Every last one.
They drug em, they run em, they bet on em, they put them down.
How about PIR? Traded below 0.20 for about a week, bottoming out at 0.10 Closed Friday at $7.17 7070% return.
I remember driving by my local Pier 1 Mar 09 and seeing 80% off signs in the window.
One day soon, not tomorrow (but who knows)all these 401k funds are going to look like foreclosed real estate. And, then the unfunded pension funds and bankrupt 401k will all come home to roost on the shoulders of folks who contunue to hold their noses and have blindfaith that this is all going to be just fine.
Want to know how good retailers of any kind are doing, drive behind and count the dumpsters (declining)and look inside (empty). Then go over to the hotels, then the office buildings repeat and rinse. Checkout the staff at the loading docks and the guys who restock the shelves, they are near gone.
That folks, is your Wall Street Journal, Barrons, or Zero headline in the future(but not CNBC), but you can see it today if you get out from behind your computers, open your eyes and look around.
Nowadays they advertise 30% off
Doubtful here in Pittsburgh.
Couldn't even get in the parking lot of Costco, Best Buy over the weekend. When I finally did, every salesperson was talking to a customer. Since I usually buy retail stocks with the IBWA technque, on Monday at the opening I promptly bought BBY for a 5% gain in 4 days.
PIR, ODP n GNW - 3 of the cleanest march 9 / 19 hailmary longs. Of all the C, SIRI, auto n short cover names to be long for the whoosh, GNW was the simplest no-brainer as there was NO way in hell they weren't firewalled (even before the Minnie bank "buy"). The easiest short cover en masse be 90 - 99% over. Next ones in 2012 n 2015 ish ought be even funner. Until then ... got puts ?
F is up about 688%
up 1187% from Nov/08 low... sheesh
I have some long OTM put options on FITB with money I can lose . I figure this is the crappiest stock out there with massive shadow inventory in areas where "the recovery "will least likely ever return. I have no idea why it recvd tarp funding it was not tbtf . This a prime example of a crap stock gone wild while other banks which have very stron fundamentals and didn't take tarp dont seem to get the same upside in price . looking at the charts there are some serious price gaps that will get closed. I figure I will buy lotto tickets every 3-6 months assuming a 50% reversal in price. When this stock does return to earth it will pay for the small losses I accrue over time .I can place this bet 56 times (55 now ) and still make money when Black turns Red .This is a highly speculative trade I am in but the money is small time and I can afford to lose it and it is better wasted here than on lotto where my chances are even slimmer . lol . Genworth is a pig with lipstick also but I think it's demise will come much later in the game .
That's hash-sheesh, that's what they give to the financial terrorists, just before they assassinate your principle. A round of virgins for all my friends ...at Gold Finger, he's the man with the Midas touch.
I came to the same conclusion, independently, on Friday,
while watching AIG... but the performance that I love
the best is that of The Brunswick Corp(BC) ... the
only way you can describe this company is that its
a hole in the water for you to pour money in ...
upon further reflection, however, I suppose that
there is a gaggle of GS people with summer houses
in Remsenburg and Quogue who are shopping for getaway vehicles, just waiting until the price is right ....
You forgot the mega crap: C, FRE, FNM, and AIG.
The Seth Klaman piece is pure gold--
Finally, some actionable investing "information" from ZH! Seeing that I like to take an occasional short position can you please post the GS Conviction Buy list as well. That would be swell. XOXO
for a bank, STI on the CON list and has been reiterated twice.
long term otm put on this piece of shit is a possible lottery winner.
STI looks pretty strong to me.
Doesn't look like a shortable stock.
Try shorting something weak, like XOM, VZ, T, FSLR, etc.
Thanks, DH.
STI is where I had some $$$ until moving it to a community bank a year ago. I agree that STI is in deep trouble and may be one of the largest bank failures of 2010. STI funded a huge amount of residential and commercial real estate loans during the boom times here in Florida. Their Access 3 HELOC program has got to be sucking serious wind. It is amazing when considering their exposure in the Atlanta Metro and Florida markets that it hasn't gone down yet (all thanks to FASB, of course). I have tried to short it several times and keep getting run over. Maybe it is nearing the time to take one more swim in the pool. After all, Spring is just around the corner!
GS ran it up for the approx 2 weeks before the con list; i watched the ticks and it was obvious to see the accumulation and voila, conviction buy....GS fades it back down a couple of bucks, then it runs up again, and voila, several days ago iteration number one came out. it'll likely run down again as GS fades it. i'm guessing we don't get a second reiteration on this junker, they'll just dump.
robo...always appreciate your insights but being on a GS conman list is a bit different in my view.
assumption....not that fundamentals mean much of late (they will become fashionable again sometime, approx. one-two weeks after the market tanks), but I'm aware of STI and agree with your assessment....they are a p.o.s. in a p.o.s geography with p.o.s. assets. i've seen two separate quotes from their ceo and it seemed that he was not trying to sugar coat anything....again, it was only 2 quotes and I don't trade that stock individually but follow the sector closely.
EDIT...my orig post above says that STI was reiterated twice. I think I was mistaken as there was only one reiteration after the initial placement on the GS conjob list. My apologies for the confusion.
Why hedge? If you mean, Fuck, write it.
My wife received a $20K net bonus. She obviously does not work for Lord Blankfein. She has asked me where to put it: leave in bank at a meager CD interest rate for one year; deposit it in her speculative investment account and go short or long something; buy a corporate hi-yield short maturity (less than 3 years)bond; buy approx 15 oz of gold; equivalent of palladium; or silver.
I told her I would select the gamble based on the majority of opinion and she agreed to go along. I told her I would be advised by several bloggers here that taking a tip from anonymous or avatared posters to a blog is foolhardy and likely insane. So any who are tempted, don't bother with the caveat.
This money is not necessary for anything we need or want since our consumerist appetite is minimal.
Any suggestions?
This is a test.
Aim to maintain the value. Real-estate, gold or silver.
Find a piece of property you like/want/or looks like an amazing deal, then LOW BALL the hell out of them; really jew them down. Be willing to walk if the deal doesn't make you wet your pants. You're looking to get in at 10% - 25% of "appraised" value. Check out the legals in your paper(s).
Or, buy a 1oz gold eagle or buffalo for each member of your immediate/extend family. You can't go wrong in the immediate/long term - gold will continue to dominate over fiat money. And if the SHTF, those precious coins could literally save a life, or a family.
Or, buy silver. This may be THE long-term investment, as silver is such an important industrial metal. And it's still very cheap, imho.
Hell, invest in art, antique cars, etc., anything but the greenback. Good luck.
Thx
thanks fo the anti-semtic reference, thou it does fit
well with the theme of this site
so whats you age? you sound young. either way capital preservation is the best investment strategy. i put my 90 year old mom in TIPs, which you can buy directly from the government, which is better because pooled assets in a brokerage are all treated the same in the event of a financial meltdown, and brokers don't really buy these things, you don't own them, you just own the brokerage.
the problem with TIPs lately is the fed buying their own product and placing a bid under these things, which means you often buy at a premium to par, you want to buy at a discount, and that used to happen, but not so much. right now the Pimco fund STPZ looks okay, it is a TIP fund, which I don't like normally because they merely reflect the current price of the bonds, but the STPZ looks okay.
put some in a rainy day fund, for bottom fishing when the market collapses, and they buy companies which function like utilities, which have a steady stream of revenue despite the awful economy. actual utilities are facing some headwinds, as people get into solar power, and start selling electricity back to the utility, they have to write checks. which brings us to solar, according to something i read here, the chinese have a surplus of solar panels, mostly the older style, which are perfectly good, but the new technology is coming out, and all indications are they will dump this older surplus on the market. this year should provide an excellent chance to buy solar panels for your house, what with lower prices and government subsidies, it might be as close a free upgrade as you can get (hopefully) save some money for that.
and in the event that gold mining company stocks crash, buy them, the wisdom that physical gold is the only gold worth having is misplaced. countries with small currency floats, stable political systems, and large relative gold reserves will start issuing gold backed currency. these countries will become the financial centers. Small is better, the US cannot possible come up with enough gold to back their currency, reason, too much currency. Johannesburg, Jakarta, and South America perhaps. and look at the new juniors ETF, countries will value their currency with assets in the ground, just as the Saudis value their assets by oil still in the ground.
okay i just spend about 100k of your 20k bonus. live long and prosper.
pot belly stove, 1 year supply of necessitys, emergency generator,bicycle, and silver, pre 1964 coins, a 22 rifle, could come in handy, too
For a hint why REV has such a high short interest, look at their balance sheet. Here is a link to it on Yahoo finance:
http://finance.yahoo.com/q/bs?s=REV&annual
Those numbers at the bottom in parenthesis are some big negative numbers.
Okay, shouldn't the ODP be a proxy for general economy minus any corporate specific issues...what craziness is that you could do a trade that returns 10 times you money in one year on such a basic boring company...sure it makes sense you could double, or even triple your money in the volatile market of the past year...and I can almost wrap my head around a casino stock being more volatile, in that it is speciality sector that could be really harmed by sudden decrease in luxury, or tourism etc...but Office Depot?
How about this one?
Dollar Thrifty Rental Cars
Up over 3,000%.
That "paltry sum" of $20,000 invested at the lows last year could have been parlayed into $600,000...
LOL.....
And we are not going back to the lows. So you guys can forget about any more 30 baggers. Party is over, you were caught in the stands and not on the field. Sorry poor schmucks. You will never win. We OWN you.
You've got me. I can't top DTG. The best I can do is CHRS 1378% and CMRG 1354%.
FOH has been in your posts. Still up 600%, even though its down more than 50% from its high. Its funny to look at their balance sheet and realize its $23 million inventory is a bunch of lingerie and sex toys. Wait a minute, why am I doing fundamental analysis?
Short the FED!
This sound a bit like Pavlov's dogs to me. Somebody is training the dogs to respond to bad news in odd ways. Enough positive reinforcement and the dogs will do their master's bidding. Just think if unemployment grew to 12%, that would certainly mean DOW 36,000.
Who said that?...
Pay no attention to that man behind the curtain...
What about Diedrich Coffee, ddrx. .37 to 37.
Could this be the market top? ZeroHedge issues its first long recommendation.
EURO daily chart now gives bullish signals.
http://www.zerohedge.com/forum/market-outlook-0
Zero nails it! From the list:
Energy Conversion Devices (ENER), up 8.63% today.
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