In july 2001 the short interest in enron's stock jumped 30%. That same month short interest in Lockheed Martin rose an even steeper 55%. Enron is history. Lockheed? Its stock is up more than 50%. Numerous studies have shown that, on average, stocks with high or rising levels of short sales underperform the market. In fact, stocks with high short interest continue to underperform for two to three years after they're no longer heavily shorted. But as Lockheed's stock shows, there are plenty of exceptions. Investors who want to play it safe can simply avoid buying stocks with high short interest. The stock exchanges report short interest in each of their traded stocks toward the end of the month; the numbers are current as of the 15th of that month. You can get the data online at forbes.com.
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