A Basket of Shorts

01/13/2015 7:00 am EST


James Pearce

Director of Research, Investing Daily

In last year's Top Picks report, Jim Pearce chose a long position in Apple, which rose 37%, and a short position in 3-D Systems, which fell 63%. This year, the editor of Smart Tech Investor opts for a package of short sale ideas in technology.

We think it is time to take a hard look at some solid short sell opportunities. Therefore, our Top Pick for 2015 is not a single stock, nor is it a long/buy recommendation. Instead, it is a basket of short sell recommendations that represent what we believe are four of the most overvalued tech stocks in the market today.

Our proprietary Smart-Tech Rating system now rates the following four stocks as being poised for a big decline: Adobe Systems (ADBE), Autodesk (ADSK), LinkedIn (LNKD), and Salesforce.com (CRM).

The stock market in general, and tech stocks in particular, have been on a tear the past three years while the Fed flooded the financial markets with cash.

But now that QE is coming to an end, investors will begin avoiding companies like these trading at very high multiples that generate very little true earnings and don’t pay much of a dividend.

We also note that you don’t have to actually sell them short to profit from future declines.

Instead, you can buy put options that go up in value when the price falls below your strike price (the price at which the option can be executed; e.g., you can make someone else buy that stock from you at that price).  

This type of investing is not for everyone. That said, we believe many tech stocks will experience substantial revaluation in 2015, including these four.

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