My Top 4 Short Sells

With market about to turn, investors can make huge money by shorting shares of Bausch Health Companies Inc (TSX:BHC)(NYSE:BHC).

| More on:

As interest rates rise again and again and unemployment reaches another “new low,” the stock market has become much more vulnerable than most want to admit. For those who study leading economic indicators, however, the situation could not be more clear: certain stocks and sectors are in for a major pullback.

At the top of the list is none other than Air Canada (TSX:AC)(TSX:AC.B). Airlines are traditionally some of the worst businesses to invest in. As discretionary income decreases (due to higher oil prices and interest rates), many people will have no other choice but to cut vacations they may be planning. To boot, the airlines will have to incur higher-than-usual costs to fly planes from one location to another. Higher oil prices impact everyone!

The second name is, again, in the travel industry. As the cost to move a cruise ship escalates alongside the price of oil, shares of Carnival (NYSE:CCL) have seen very little revenue growth over the past few years. In spite of a bottom line that is getting better and better, the momentum will be difficult to maintain. Once the motion comes to a stop, there will be very little reason for investors to continue holding shares of this name.

Back in Canada, companies such as Canadian Western Bank (TSX:CWB) may need to hit the pause button after shares increased by close to 50% over the past year. In spite of higher oil prices, the risk/reward ratio may no longer make sense for this name. As is always the case, investors need to ask what they are giving vs. what they are getting. At a price of more than $38 per share, profitability will need to increase drastically in order to receive any capital appreciation for buyers entering a new position today.

The final name on the list is Bausch Health Companies (TSX:BHC)(NYSE:BHC), formerly Valeant Pharmaceuticals, which remains under a mountain of debt with many drugs going off patent. In spite of a lot of “potential” in the new products that the company is either launching or re-launching, the reality remains bleak for a name such as this.

Although there may be some excellent products offered by this drug manufacturer, the reality is that the increase in interest rates (and the higher risk profile of the company) have made borrowing a much costlier endeavour, which is an added headwind to the company.

In spite of many long opportunities in the market, investors seeking to make a profit from both owning and shorting stock have even more tools at their disposal. As the economy becomes more vulnerable, it may be a best practice to hedge a few holdings.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Ryan Goldsman has no position in any of the stocks mentioned. The Motley Fool owns shares of Bausch Health Companies.

More on Investing

Senior Couple Walking With Pet Bulldog In Countryside
Dividend Stocks

CPP Insights: The Average Benefit at Age 60 in 2024

The average CPP benefit at age 60 in average is low, but claiming early has many advantages with the right…

Read more »

edit Sale sign, value, discount

2 Bargains I’d Buy as They Dip Toward 52-Week Lows

Spin Master (TSX:TOY) stock and another underrated Canadian play could surge again as they look to reverse course.

Read more »

Dividend Stocks

Why Did goeasy Stock Jump 6% This Week?

The spring budget came in from our federal government, and goeasy stock (TSX:GSY) investors were incredibly pleased by the results.

Read more »

woman analyze data
Dividend Stocks

My Top 5 Dividend Stocks for Passive-Income Investors to Buy in April 2024

These five TSX dividend stocks can help you create a passive stream of dividend income for life. Let's see why.

Read more »

investment research
Stocks for Beginners

New Investors: 5 Top Canadian Stocks for 2024

Here are five Canadian stocks that might be ideal for a beginner investment portfolio.

Read more »

Energy Stocks

Here Is Why Enbridge Is a No-Brainer Dividend Stock

For investors looking for a no-brainer dividend stock worth holding for the long term, here's why Enbridge (TSX:ENB) should be…

Read more »

Dots over the earth connecting the world
Tech Stocks

Hot Takeaway: Concentration in 1 Stock Can Be Just Fine

Concentration in one stock can be alright under the right circumstances, and far better than buying a bunch of poor-performing…

Read more »

grow money, wealth build
Bank Stocks

TD Bank Stock Got Upgraded, and It’s a Good Time to Load Up

TD Bank (TSX:TD) stock is getting too cheap, even for analysts at the competing banks!

Read more »