Short selling does seem kind of weird. How can you really make money when a company’s shares fall? Well, for the most part, you are just reversing the buy process for stocks to short. That is, you borrow shares and sell them. Then hopefully you will buy them back — to cover your position — when the stock price is lower.
Keep in mind that some of the world’s top investors are pretty good short sellers. They understand that it is extremely tough for companies to keep up the growth and fight fierce competition. So why not make money off of this?
Although, there are certainly risks to short selling. Perhaps one of the biggest is the proverbial “short squeeze.” This is when a stock spikes because of the forced buying of short sellers who need to cover their positions. So yes, you really need to do your homework and not have too much of your portfolio in short positions.
Despite all this, there quite a few opportunities for shorting. If anything, the recent fall off in of the tech stocks — after a big move on the upside — is an indication that the markets could be poised for a correction.
So then, let’s take a look at four interesting stocks to short: