Five Stocks which will Drop, but Might still Snap Back Higher
A friend of mine said to me yesterday that he's never seen so many stocks that trade like options. They're "bifurcated specials" -- either they're going to double or triple from here or go to zero in fairly short order.
Even though many commentators, including Doug Kass in these pages, are warning against the market being short-term overbought, there are some stocks of companies with bad fundamentals facing terrible headwinds, which nevertheless keep going up in the short-term. Even though they look overbought, it's difficult to pull the trigger on shorting them.
Stocks like Harley-Davidson (HOG), Capital One (COF), Royal Carribbean (RCL), Carnival(CCL) and Liberty Global (LBTYA) have gone up 50 - 110% in the last 6 weeks. Yet they're down 50 - 65% in the last year. It's an overbought snap-back.
Eventually, the weak consumer environment that will persist will sour their results and impact the stocks. However, investors need to be mindful of betting on a downturn too soon -- which can be just as hazardous as betting on a recovery too soon.
Originally Published on RealMoney.com on 4/20/2009 8:20 AM EDT
