In the course of the last year, I have tried to keep my stock picks on this site long-only.

I believe it’s time to make a change and start including short positions in the portfolio as well as I feel that we are missing out on significant opportunities that would allow us to thrive in any market conditions, especially now.

Today I wanted to touch briefly on my reasons for deciding to include potential short positions in my watch list, and give you a couple of ideas that I am thinking about right now.

The Case for Shorting

In this market in particular, but in any market, shorting stocks is a fantastic way to hedge your long positions, and make some great returns betting on companies with poor fundamentals and those that are strategically flawed and going to $0 (sorta like uWink!).

If you would like to read an overview about shorting and my thoughts on it as it pertains to a couple of companies in my portfolio, click here.

At any rate, I have tried to keep this site simple enough for the average investor, yet sophisticated enough for hardened traders to all benefit from it and get ideas to add to their own portfolio.

I don’t think that creating short positions will complicate that too much, but I did want to stress to those that are unfamiliar with the concept of shorting or not comfortable doing it, that it is very dangerous, and you can lose a lot of money very quickly.

You need to be very vigilant with your stocks, have trailing stop orders, stop-loss orders, and a whole host of other intangibles that you don’t have to worry about in a long-only portfolio.

The upside is that we get a chance to take advantage of the darker days of the market and make money off of those days, instead of just being pummeled while our stocks are taken down.

I will always add a warning to any stock/ETF that I short to let you know of the risk rating for that trade, as I do with all of my long-only trades, but suffice it to say, this is a more difficult and cumbersome trading strategy that can be very lucrative if done properly.

Here’s how it will work

I intend to take advantage of shorting stocks from here on out, and you’ll now see this in my “Portfolio Recommendations” where I will designate stocks that I am selling short with an “(S)” next to the ticker symbol.

The same will hold true for positions that I am buying to cover, or recommend buying to cover. They will also contain an “(S)” next to their ticker symbol.

But be careful!

Because a stock that I am recommending you short will be in the “Sell Now” section, it is actually the exact opposite of the action you should take with a position if you were long-only.

Instead of selling the stock outright in a traditional buy low, sell high scenario, I am instead telling you to SHORT the stock now (sell the shares short) and START a position in the company betting that its price will decline.

The same holds for stocks that you’ll see in the “Buy Now” section.

Traditionally this would mean that I want you to buy those stocks for inclusion into a long term holding portfolio.

But it will mean the exact opposite if you see the “(S)” next to the name.

I want you to END your position in this stock by buying to cover the shares you had previously sold short.

If you aren’t comfortable doing this, and understand what I am talking about, then I would suggest you not even attempt to trade the shares of stocks that I recommend shorting at all and just pay attention to my long-only suggestions.

So now let’s get to a couple of names that I am watching closely to short…

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