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3 Stocks That Won’t Be Saved By Market Gains

While most stock analysis reports available involve companies with bright future prospects, today we have decided to pack a treat for risk loving short sellers who want to profit from struggling businesses. Our top picks on this journey are provided by Goldman Sachs’ list of ten stocks with a high dispersion rating, in terms of deviations of returns from the market, and an outsized downside potential, which suggests these stocks may be poised for failure no matter what happens in the market. Of these, we will be focusing on Transocean LTD (NYSE:RIG), Expedia Inc (NASDAQ:EXPE), and Cablevision Systems Corporation (NYSE:CVC). Moreover, we will also focus on how hedge funds have been trading these companies of late.

Why do we pay attention to hedge fund sentiment? Most investors ignore hedge funds’ moves because as a group their average net returns trailed the market since 2008 by a large margin. Unfortunately, most investors don’t realize that hedge funds are hedged and they also charge an arm and a leg, so they are likely to underperform the market in a bull market. We ignore their short positions and by imitating hedge funds’ stock picks independently, we don’t have to pay them a dime. Our research have shown that hedge funds’ long stock picks generate strong risk adjusted returns. For instance the 15 most popular small-cap stocks outperformed the S&P 500 Index by an average of 95 basis points per month in our back-tests spanning the 1999-2012 period. We have been tracking the...


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