How to Make Money on Terrible Stocks

This is why I buy stocks no one else wants

Hey Wealth Building Family!

Question: What is the worst stock you ever bought?

And why was it the worst stock you ever bought?

Your answer to that 2nd question is probably that you lost a lot of money on it.

Could there be signs you might have seen that could have tipped you off that it was a lemon? Maybe there were.

What if you knew there were some big money people who hated the stock so much they borrowed shares of it and sold them because they thought it was so bad of a stock they would just buy them back at a lower price later and then return them to the person who lent them? Could that have tipped you off?

Well… It’s a little sticky.

First of all, this process I described is called shorting a stock, and people do it all the time. In fact, the number of shares that are shorted of any given company is public information. This data is reported twice a month to the public.

But… (Yeah. There’s always a ‘but’.)

These traders are not always right, and seldom massively so. In fact, occasionally they are horrendously wrong and a “short squeeze” ensues, leading to the stock shooting up and the short sellers losing a lot of money.

But most shorted stocks aren’t either extreme. A paper from MIT shows stocks with above average short interest underperform by 3% - 15% annually. The more heavily shorted, the more negative the performance tended to be.

So what about the typical shorted stock? It can lose… a bit statistically. What if there was a way to make up for that downward bias, and then some. Enough to make owning it actually… good?

Here’s what I do (sometimes)…

First, if it’s a stock I like and think it has some merit—