Investors saved themselves a ton of money last September when I told them to sell stocks en masse.
Then in late November, I provided two very simple lists: one for the long side and one for the short side. Each list contained 10 stocks allowing an investor to construct a long/short portfolio that I believed would outperform the market during 2009.
Well with one month to go an investor that started on the first trading day of this year would be enjoying gains of more than 15% as of today, the second to last trading day in January.
Interestingly in a year that has started off in the negative, the combined return of the 10 stocks on the long side is close to 2%. Not bad, but the real juice in the portfolio is not surprisingly on the short side.
There the 10 stocks to avoid are down an aggregate of more than 13%. That is double the year to date loss of 6%. Put it all together, and you are off to the races.
Leading the way today is stock to avoid recommendation Eastman Kodak (EK). This company is going through a gut wrenching change to its business model. It would be hard enough to make the transition, but adding in a global recession and conditions are in place for a complete train wreck.
The former film and camera giant reported that it had lost $137 million or $.51 per share in the fourth quarter. Excluding charges the loss was $.08 per share. Analysts were expecting a profit of $.21 per share.
In response, the company announced that it would cut another 14 to 18 percent of its workforce in 2009. This on top of some 40,000 jobs lost over the last five years as the company moved away from film to digital.
The response to the news was fierce. EK was down more than 27% during the day of the news. Now we know why the company withdrew guidance in December. I suspect things were worse than they even expected.
No doubt the company is trying to become a lean mean digital machine. Will they succeed? Who knows, but even if they do recover it will be down the road making the stock an easy short for 2009.
This article was written by Jamie Dlugosch, contributor to InvestorPlace.com. For more actionable insight like this, go to: www.InvestorPlace.com.
