When looking for stocks to short, I tend to look for companies that fall into one of three categories:
- The first category of stocks to short are stocks that are just wildly and insanely overvalued. However, often times, these stocks also tend to be momentum names like Netflix (NFLX), so you have to be careful when you initiate your short.
- The second category of stocks to short are those that are unquestionably going to go bankrupt at some point. JCPenney (JCP) is increasingly looking like one such example.
- The last category of stocks to short are those whose fundamentals and financials make the path of least resistance to be down.
Here are four such candidates if you’re looking for stocks to short: