The bear market has moved into a new phase. What started as a reasonable reaction to a potentially slowing economy accelerated into a full-blown crash triggered by the credit crisis and near collapse of the banking and financial systems.

The speed and extent of the market's move down caught many by surprise. Interestingly, those on Main Street have done significantly better than those on Wall Street. This time around it was the big-wig hedge fund managers left holding the bag. Because of the amount of leverage used by the hedge funds, many managers had no choice but to sell positions into the tsunami.  Margin calls require funds to raise cash.

Any guesses as to what they chose to sell?

You got it. They sold their biggest winners before the bull market came to a screeching halt, and those biggest winners were some of the hottest momentum stocks.

Because of the selling, these stocks are now the biggest losers during this bear market.

Typically, the bottom of a bear market is marked by a wave of forced selling. We have seen that happen here in spades. So is now the time to jump in?

If you have been following my Rational Investor approach, you managed to avoid this big mess by moving a large portion of your portfolio to cash. Now with that cash in hand, the time has come to take advantage of the misfortune of others.

What I'm proposing here is that by identifying some of the largest positions of hedge funds prior to the decline profits will follow. In theory, the stocks sold due to forced selling do not reflect true value.

Instead, these stocks are now inefficiently priced in a very disjointed market. Buying and holding them for the long term should result in significant out-performance. 

According to my research, these six stocks had the highest dollar amounts invested by hedge funds. I suspect many were sold recently due to margin calls. They are as follows…