5 Reasons to Go Short in 2010

#3 Lousy Companies Will be Punished in 2010

There are more companies waiting to blow up in 2010 then I have seen in many years. In 2007, when the market was up 3.5%, the typical position in my ChangeWave Shorts service was up 51%. A lousy company is a lousy company, and the only year since the Internet bubble that they were not punished by the market was 2009. This will change in 2010.

Many companies will report higher profits in 2010, but this will also be the year of the broken balance sheet and stalled growth. And while higher profits may satiate the Street in the first half of 2009, beginning in the third quarter, the Street will want to see growth in revenues as well as profits, and will punish companies not providing it.

Looking for some good shorting opportunities? Well, just use common sense. Are you going to buy a boat from Brunswick (BC), a Hog from Harley-Davidson (HOG), a diamond from Zales (ZLC), a Pre from Palm (PALM), or a new home from KB Home (KBH)? Well, neither are most people in a recession.

Next: You Don’t Need to be Afraid of Going Short