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5 Toxic Stocks To Abandon Or Play Short For Profit

The success of an investor depends on proper identification of overpriced toxic stocks and the rightly priced ones. However, the over-bubble stocks and the fairly priced stocks are intermixed in the market place in such a way that it becomes very tough to differentiate between them. Investors who can figure out the toxic stocks and dump them at the right time are likely to benefit.

Usually, toxic stocks are susceptible to external shocks and are burdened with huge amount of debt. Moreover, the price of the toxic stocks is unjustifiably high. The irrationally high price of the toxic stocks is only short-lived as the intrinsic value of these stocks is lower than the current bloated price.

The high price of the toxic stocks can be attributed to either an irrational exuberance associated with them or some serious fundamental drawbacks in the stock. If you own such stocks for a long stretch of time, you are likely to witness huge erosion in your wealth.

On the other hand, if you can pinpoint the toxic stocks, you may gain by resorting to an investing strategy called short selling. This strategy allows you to sell a stock first and then buy it when the price falls.

While...


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