Five More Stocks That You Can Short
SolarCity (SCTY) and SunEdison (SUNE)
I recommended selling SolarCity over a year ago when the stock was trading over $70.
With the Solar Investment Tax Credit set to expire before the end of 2016, residential and commercial solar installations will take a huge hit in the U.S. Falling costs have been a great driver for solar industry, however the expiry of ITC will make the installation less economical. Installation prices can shoot up by as much as 40% for residential solar, and by approximately 25% for commercial solar. This will disrupt SolarCity’s business model of leasing solar panels, making the stock a great short candidate.
Price Target: $15
I have never been a fan of stocks that show no signs of profitability and continue spending billions of dollars into expanding, which is why I think SunEdison is also a great short at present levels. Although the stock has taken a hammering in the last few weeks, falling from high twenties to just over $3, I think it still holds downside potential.
Price Target: $1.5
Chesapeake Energy (CHK)
Chesapeake is a natural gas and oil exploration and production company. It explores, develops and acquires properties for the production of natural gas and crude oil from underground reservoirs and also provides marketing & midstream services.
As evident, the company’s business almost completely relies on oil and natural gas. Hence, the 70% YTD drop in share price isn’t surprising given the weak oil and natural gas pricing environment. However, investors shouldn’t make the mistake of bottom-fishing as things will probably get worse for Chesapeake.
According to IEA, oil prices aren’t expect to increase considerably anytime soon and the agency expects prices to hit $80 per barrel only by 2020. To put in perspective, oil was trading at over $100 per barrel in mid-2014.
In addition, natural gas prices are also expected to decline due to oversupply concerns. Natural gas is already trading near three year-lows and a further decline will hurt the companies in the sector. Hence, I think investors shorting Chesapeake can still expect to reap over 50% profits.
Price Target: $2.5
Valeant Pharmaceuticals (VRX)
Shares of Valeant Pharmaceuticals have fallen from nearly $250 in September to $70 now. If you have missed the shorting boat, don’t worry because it doesn’t make a difference as many believe the stock is headed to $0. Yes, you can still reap 100% profit by shorting Valeant.
The stock described by Citron Research as the “Enron of pharmaceuticals”, Valeant has fallen from grace pretty swiftly thanks to questions about the company’s drug pricing and accounting practices. To make matters worse, the company’s much-heralded female libido drug Addyi has been met with a cold reception in the consumer marketplace.
Omega Advisors sold its stake in Valeant Pharmaceuticals in recent weeks after buying more shares during the third quarter, and the future doesn’t look good for the company. Valeant is a falling knife that will likely fall all the way down to $0, making it one of the best short pick in the market.
Price Target: $0
3D Systems (DDD)
I have been calling 3D Systems a short ever since share hit $90, and with the shares now down to roughly $8.5, my stance hasn’t changed. While many investors believed that 3D Systems has bottomed and all the bad news is baked in the share price, I think the stock has a lot for downside to offer.
The company’s growth was fueled by 50+ acquisitions that it completed in the last 40 months. Now that the 3D printing bubble has popped, I think the acquisitions will come back to haunt 3D Systems. Rival Stratasys paid almost a billion dollar in goodwill impairment on its acquisitions charges in the previous quarter. 3D Systems hasn’t paid any goodwill impairment charges as of now, however given the 50+ acquisitions that the company completed, it’s highly likely that the charges are just around the corner. This is why I think the stock has a lot more downside potential, making it a great short.
Price Target: $5
Published on Nov 20, 2015By Ayush Singh