A little stock experiment: buying hated stocks

I was intrigued by an article in The Globe and Mail, carrying the article “Beat the market in 2013 with 5 of Wall Street’s most-hated stocks". The gist of their article is that if you bought heavily shorted large and mid-cap stocks, you would have beat the S&P 500 by 9.28% each and every year. Market cap matters a lot, because with with the smaller names, negative returns were delivered.

Interesting.

Well, I went to over to the Square Mile Data website, where they handily display the 20 most shorted stocks on the exchange.

I broke the 20 down into market indices, and I recorded their 6 month relative strength.

The top performing share on a relative strength of 6 months, which also happened to to be in FTSE, is Home Retail (LON:HOME) . It has a Piotroski score of 5.

Not quite with such a large amount of shorting, and a lesser RS6 of 21%, but with a higher Piotroski score of 7, is WH Smith (LON:SMWH) . An interesting stock, because if I recall, they’ve got some kind of turnaround going on there.

Very very interesting is HMV (LON:HMV), which has a tiny market cap of £7.5m, a Piotroski score of 3, an RS6m of -54.7%, and fails to make it into an index. This should make it an interesting short candidate. Given the outlook for the company, it might be a good candidate, too.

Anyway, something to check up on in 6 months time. I have the warm tinglies about this one, but no positions. I think this will work! Let’s see, shall we?

HOME 128.3p

HMV 1.74p (short candidate)

SMWH 677.8p

ASX 3118