Exxon Mobil Top Short As Oil Drops
There is a lot of froth in the market right now, with investors discounting how bad the global pandemic could get. The Nasdaq NDAQ even went positive on the year, and oil and gas, despite seeing an anomaly of negative oil prices, has been the strongest sector off the March lows. In times like these, it might be pertinent to take a few short positions, or to at least sell off some flawed companies. We’re going to take a look at the most opportune shorts according to the factor model scores, in which A is a strong score and F is the worst score.
Exxon Mobil Corp XOM is one of the top shorts this week, after surging over 40% from the March 23 low to May 12. It carries factor scores of D in Technical, C in Growth, C in Momentum volatility and D in Quality Value. The company has had a terrible 2020 overall, down over 40%, but the recent surge is giving opportunity for shorts to bet against the company. With the global economy in a tough place, oil demand is tanking. Supply and generation of oil has been increasing for the last decade, so with increased supply and decreased demand, prices have dropped significantly.
Proto Labs In PRLB c is another top short for this week as the stock has rallied too far, gaining over 53% from the March 23 lows to May 12. After beating earnings and revenue estimates on April 30, the stock gained some momentum, but has likely gotten ahead of itself. With the largest end market of the US for its products, and the US going to go through a severe recession at least temporarily, it looks to be a good time to bet against Proto Labs Inc.
Sunrun In RUN c is a company that provides homeowners with clean, affordable solar energy and storage, which is an expanding market. However, with oil and gas prices cratering in 2020, the demand looks to thin soon as consumers look to save on costs overall, especially during a recession. The stock has staged an impressive rally off the lows, which gives short sellers a chance to step in on the next down leg.
L Brands In LB c is another company worth shorting, even at these depressed levels. This company generates about 95% of sales in North America, and is a consumer cyclical based retailer, which is one of the hardest hit sectors during the pandemic. After the dividend was suspended as sales cratered, it is hard to find a good reason to own the stock, but reasons to short are plentiful. It is one of the worst factor scorers, with a C in Technical, D in Growth, F in Momentum Volatility, and C in Quality Value. The stock has lost over 41% this year and downside momentum looks to continue.
Zogenix Inc is a California-based pharmaceutical company that has had a tough 2020 so far. In February, the company announced that the U.S. FDA extended a review period to late June for one of their products, Fintepla, that they expected to close in the first quarter. The coronavirus pandemic might complicate things, and the stock has now lost almost 51% this year. The trend may continue. The factor scores for Zogenix Inc are equally troubling, with a D in Technical, D in Growth, C in Momentum Volatility, and F in Quality Value. This is one of the top shorts according to the factor models.