CHICAGO, Oct. 25, 2012 /PRNewswire/ -- Stocks in this week's article include: Amazon.com Inc. (NASDAQ: AMZN), Cogent Communications Group Inc. (NASDAQ: CCOI), Concur Technologies, Inc. (NASDAQ: CNQR), ViaSat Inc. (NASDAQ: VSAT) and Range Resources Corp. (NYSE: RRC). Kevin Matras pulls out his Toxic Stocks bearish screen that gained over 120% in the bear market of 2008, and shows how to use it this year.
Screen of the Week written by Kevin Matras of Zacks Investment Research:
It's been a while since I highlighted a bearish stock picking screen. Typically, I'll only follow a bearish strategy once the market officially enters into bear territory, which is defined as the market being -20%.
However, there's nothing wrong with using a bearish strategy to put toxic stocks on your radar screen to alert you to get out (if you happen to own one of them) or to consider shorting if you don't.
The main theme of this screen is to find overvalued companies.
Usually the best opportunities for short-selling are the ones that are overvalued on valuations, underperforming on growth and are receiving downward earnings estimate revisions.
So how did it do?
In 2008, this strategy, using a 4-week rebalancing period, produced an average compounded return of over 120% while the market plummeted nearly -40%.
In fact, even if you didn't start trading this strategy until the official beginning of the bear market, which began in July of 2008, the strategy still produced an average annual return of over 70%.
And it's not too late to consider this one now.
Sign up now for your free trial today and start picking better stocks immediately. And with the backtesting feature, you can test your ideas to see how you can improve your trading in both up markets and down markets. Don't wait for the market to get better before you decide to do better. Start learning how to be a better trader today: http://at.zacks.com/?id=111
Disclosure: Officers, directors and/or employees of Zacks Investment Research may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material. An affiliated investment advisory firm may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material.
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