{"id":24779,"date":"2023-06-20T01:19:03","date_gmt":"2023-06-20T05:19:03","guid":{"rendered":"https:\/\/ifintechworld.com\/markets\/20-stocks-that-look-like-theyre-in-bubble-territory-right-now\/"},"modified":"2023-06-20T01:19:04","modified_gmt":"2023-06-20T05:19:04","slug":"20-stocks-that-look-like-theyre-in-bubble-territory-right-now","status":"publish","type":"post","link":"https:\/\/ifintechworld.com\/?p=24779","title":{"rendered":"20 Stocks That Look Like They’re in Bubble Territory Right Now"},"content":{"rendered":"
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While it\u2019s become fashionable in recent days to declare the stock market to be forming a bubble, few have bothered to indicate which individual stocks are most vulnerable to popping.<\/p>\n

That\u2019s a major oversight, since not all stocks will suffer equally if and when the market crashes. When the Internet bubble deflated in 2000, for example, some market sectors\u2014such as so-called small-cap value\u2014actually made money while highflying dot-com stocks were crushed.<\/p>\n

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To help identify the bubble stocks most likely to crash, I turned to a\u00a0study that appears this month in\u00a0The Review of Financial Studies<\/em>. Entitled \u201cThe Dynamics of Disagreement,\u201d the study was conducted by three finance professors: Kent Daniel of Columbia Business School, Alexander Klos of Germany\u2019s Kiel University, and Simon Rottke of the University of Amsterdam. (Daniel used to be Goldman Sachs\u2019 co-chief investment officer.)<\/p>\n

The researchers\u2019 core insight is that stocks that are difficult to sell short are likely to be overvalued, Daniel said in an interview. That\u2019s because short sellers play an essential role in providing a reality check on the optimists who are predisposed to always view the glass as half full rather than half empty. <\/p>\n

This doesn\u2019t mean that the short sellers are always right, needless to say. But then again, the optimists aren\u2019t always right either. It\u2019s in the give and take between the longs and the shorts that the market generally does a good job of setting a stock\u2019s price. (Short sellers borrow shares they deem overpriced and sell them, hoping to repurchase them at a later date, return them to the lender, and pocket the difference.)<\/p>\n

When you take away the counterbalancing pressure that the short sellers provide, stocks can become like Icarus\u2014soaring so high that the sun melts their wings of wax.\u00a0To show this, the researchers created a database of highflying stocks that also were difficult to short, as measured by a dearth of shares in the share-lending market. They found that, between 1980 and mid-2020, these stocks lagged the market for five straight years after making it into their database, lagging the market over those five years by 13% a year, on average.<\/p>\n

Prof. Daniel shared his methodology with\u00a0Barron\u2019s<\/em>\u00a0in August 2021, which I used to produce a list of 131 bubble candidates.\u00a0Since then, through June 12, the 25 stocks in that list with the largest market caps\u2014which is the list that appeared in the column\u2014have lost an average of 16.6%, versus a 1.2% loss for the
\n S&P 500 index.<\/span>
\n The 25 stocks on that list with the greatest trailing 12-month return on the date that column appeared (a list that didn\u2019t get published), lost even more\u2014an average of minus 66.1%.<\/p>\n

I subsequently applied the researchers\u2019 methodology on two more occasions. One was in June 2022, one year ago, and since then the 25 stocks listed in that MarketWatch column have lost an average of 27.2%, versus a 13.9%\u00a0gain<\/em>\u00a0for the S&P 500. Another occasion was this past December; since then the 20 stocks listed in that Barron\u2019s<\/em> column have lost 1.4%, in contrast to a 14.5% gain for the S&P 500. <\/p>\n

In light of this new study, and given the success (or should I say \u201cfailure\u201d) of the stocks the study\u2019s methodology produced over the last two years, I hereby present a fresh list of bubble candidates. Of the 59 stocks that the methodology identified, the 20 with the largest market caps appear below.<\/p>\n

<\/p>\n
\n
\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n
Company \/ Ticker<\/th>\nMarket Value (bil)<\/th>\n12-Month Return<\/th>\n<\/thead>\n
Southern Copper \/ SCCO<\/b><\/td>\n$54.5<\/td>\n29%<\/td>\n<\/tr>\n
Penske Automotive Group \/ PAG<\/b><\/td>\n10.4<\/td>\n39<\/td>\n<\/tr>\n
Bausch + Lomb \/ BLCO<\/b><\/td>\n6.6<\/td>\n41<\/td>\n<\/tr>\n
Leonardo DRS \/ DRS<\/b><\/td>\n4.3<\/td>\n42<\/td>\n<\/tr>\n
Cvent Holding \/ CVT<\/b><\/td>\n4.2<\/td>\n102<\/td>\n<\/tr>\n
Life Time Group Holdings \/ LTH<\/b><\/td>\n3.9<\/td>\n53<\/td>\n<\/tr>\n
Instructure Holdings \/ INST<\/b><\/td>\n3.7<\/td>\n40<\/td>\n<\/tr>\n
Fluence Energy \/FLNC<\/b><\/td>\n3.2<\/td>\n213<\/td>\n<\/tr>\n
Lifestance Health Group \/LFST<\/b><\/td>\n3.2<\/td>\n40<\/td>\n<\/tr>\n
Symbotic \/SYM<\/b><\/td>\n2.5<\/td>\n265<\/td>\n<\/tr>\n
EverCommerce \/ EVCM<\/b><\/td>\n2.1<\/td>\n39<\/td>\n<\/tr>\n
Hercules Capital \/ HTGC<\/b><\/td>\n2.1<\/td>\n31<\/td>\n<\/tr>\n
IonQ \/ IONQ<\/b><\/td>\n2.1<\/td>\n133<\/td>\n<\/tr>\n
Corsair Gaming \/ CRSR<\/b><\/td>\n1.9<\/td>\n33<\/td>\n<\/tr>\n
FLEX LNG \/ FLNG<\/b><\/td>\n1.6<\/td>\n36<\/td>\n<\/tr>\n
Target Hospitality \/ TH<\/b><\/td>\n1.6<\/td>\n149<\/td>\n<\/tr>\n
Vita Coco \/ COCO<\/b><\/td>\n1.6<\/td>\n175<\/td>\n<\/tr>\n
Tootsie Roll Industries \/ TR<\/b><\/td>\n1.5<\/td>\n22<\/td>\n<\/tr>\n
Nano-X Imaging \/ NNOX<\/b><\/td>\n1.1<\/td>\n112<\/td>\n<\/tr>\n
Evolv Technologies \/ EVLV<\/b><\/td>\n0.9<\/td>\n120<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

Note: Data as of June 13.<\/p>\n

Source: Hulbert Ratings<\/p>\n<\/div><\/div>\n<\/p><\/div>\n

Mark Hulbert is a regular contributor to Barron\u2019s. His Hulbert Ratings tracks investment newsletters that pay a flat fee to be audited. He can be reached at\u00a0<\/em>mark@hulbertratings.com<\/em>.<\/p>\n

Write to editors@barrons.com<\/p>\n<\/p><\/div>\n<\/div>\n

Read the full article here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

While it\u2019s become fashionable in recent days to declare the stock market to be forming a bubble, few have bothered to indicate which individual stocks are most vulnerable to popping. That\u2019s a major oversight, since not all stocks will suffer equally if and when the market crashes. When the Internet bubble deflated in 2000, for […]<\/p>\n","protected":false},"author":1,"featured_media":24780,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"gallery","meta":{"footnotes":""},"categories":[241],"tags":[83],"class_list":["post-24779","post","type-post","status-publish","format-gallery","has-post-thumbnail","hentry","category-markets","tag-featured","post_format-post-format-gallery"],"yoast_head":"\n20 Stocks That Look Like They're in Bubble Territory Right Now | iFintechWorld<\/title>\n<meta name=\"description\" content=\"While it\u2019s become fashionable in recent days to declare the stock market to be forming a bubble, few have bothered to indicate which individual stocks are\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/ifintechworld.com\/?p=24779\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta 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