If You Own Any of These Stocks, Dump Them Immediately

What a month!

Stocks enjoyed their best October in four years as the major averages jetted higher by double-digits. That puts the S&P 500 just a stone’s throw from its highs. Incredible…

If someone told you that the market would be back near its summer highs near the end of September, you would have written them off as drunk, crazy… or both. Yet here we are.

But despite the major averages’ furious ramp toward their highs, there are plenty of names getting left behind in this market. Much like we experienced earlier this year, this is a market of haves—and have-nots.

And you don’t want to get stuck with any of these worthless have-nots in your trading portfolio. So it’s time for a bit of class warfare here at Rude HQ. It’s time to kick these lazy stocks back to the curb. Maybe they can wash windows or beg for change—‘cause they ain’t living off our dime any more.

Don’t fret– we’ll be adding a quick trade that’s actually working in just a sec. But first, we have to call out these portfolio-crushing stocks before they inflict any more damage…

What are these stocks I’m talking about? Only the most vile, despicable names out there—the most heavily shorted names on the market. These are the stocks investors love to hate. So they’ve bet a ton of money that these stocks will drop.

Many times, we’ll see a short squeeze propel these hated stocks higher when the market snaps back after a sharp fall. That’s because the shorties are forced to buy shares to cover their bets, adding fuel to the fire.

But not this time…

While short interest declined in October, the most shorted stocks on the market continue to sag. Here’s Bespoke Investment Group with the details:

“While it’s normal for stocks with high levels of short interest to underperform the broader market when the market is falling, in rallies like the one we have seen in October, you would expect these stocks to outperform,” Bespoke reports. “This time around, that has been far from the case.  Not only are the most heavily shorted stocks underperforming the market during this rally, but a lot of them are outright down on the month.  Of the 45 names listed, 19 are actually in the red.”

Here are a few of the more recognizable names on the short list. It’s not pretty:

JCP

With no squeezes in sight, it’s time to ditch any of these heavily shorted stocks from your watch list. Give these bums the boot today.

Sincerely,

Greg Guenthner
for The Daily Reckoning

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