MarketSurge.com | Short screener | Using An Evil Knievel Screener To Find Short Trades

Here is the article. 

Summary

• Create your own Evil Knievel screener to monitor stocks you do not want to own.
• Ask yourself why would you want to own a company that loses money but still wants you to pay five times book value?
• When the market goes down, these stocks get hit very hard.

In the book, Hedge Fund Market Wizards: How Winning Traders Win, Tom Claugus of GMT Capital discusses what he calls his "Evil Knievel" stock screener. Tom defines this screener as companies trading at five times or more of book value and losing money. Tom says these companies are "trying to jump the Grand Canyon and probably are not going to make it." Tom's fund is a long/short equity fund with a 25-plus year record of 20% annual returns. The Evil Knievel screener is the tool Tom uses to begin his search for short trades, especially when the market reaches the upper limit of a Bollinger Band. Claugus talks about getting shorter as the market reaches the top of the band and selecting a few companies from his Evil Knievel screener is a go-to move. During the first week of November 2015, the S&P 500 touched the upper band and dropped significantly over the next two weeks. After another month or so of flat to slightly down movements, the market began its significant decline on December 30th. The market finished an approximate 10% decline at the bottom on February 11th, but a number of companies on this list had 30% plus drops.

Whether short selling is part of your investment strategy or not, companies showing up on this list need to have a very compelling story to justify their stock price. Additionally, anything other than a bull market is going to be a big problem for most of the companies on this list.

I decided to begin monitoring this list for my own trading purposes. I first designed my screener to include stocks traded in the United States, market cap of $2 billion or more, losing money and trading over five times book value. If you lowered the market capitalization to $300 million or more, there would be 98 companies on the list. That's a few more than I have time to analyze.

As of March 25, 2016, there are 29 companies that meet my Evil Knievel screener.