As markets attempt to rally on the back of strong corporate earnings this week, it could be setting up a comeback contrarian trade in some of the most risky and hated names out there. Stocks are off to a positive start this week after a broad majority of S & P 500 companies that have reported earnings so far beat expectations. According to data from FactSet, of the 12.5% of firms that posted third-quarter results, 69.8% posted positive surprises. The major averages are up this week on the back of those results, with the S & P 500 roughly 3.8% higher. The Dow Jones Industrial Average rose 3%, while the Nasdaq Composite jumped 4.4%. When a beaten-up stock market is bouncing off recent lows, the most hated names are sometimes what leads the way back. For those with the risk tolerance and shorter time horizons, these names could make a good trade. However, it’s not for the faint of heart as these names could lead the way down if the market turns lower again. We screened for risky and hated names in the S & P 1,500 Composite Index. These stocks are down more than double the broader market this year, and have more than 10% of their tradable shares shorted. And less than 50% of analysts are buying these names, according to FactSet. In other words, investors and analysts alike think these stocks are in trouble. Here are 15 names. Bed Bath & Beyond could bounce after cratering nearly 65% this year. The beleaguered retailer, which has struggled to execute on a turnaround strategy, has zero analysts recommending the stock. What’s more, roughly 40% of tradable shares are being shorted. According to a UBS note earlier this month, Bed Bath & Beyond is shuttering its doors mainly in its coastal and Midwest markets, and in centers where the retailer is facing more competition from big-box retailers such as Walmart and Target. Hanesbrands and Under Armour could both rally after their stock tumbles this year. Hanesbrands is down 53% this year, and has just one out of four analysts recommending the stock as a buying opportunity. The retail stock has a short interest percentage float of roughly 11%. Meanwhile, Under Armour is off 66%, and has just 37% of analysts with a buy rating on the stock. About 38% of tradable shares are being shorted. Still, Cowen said earlier this month that it is “cautious” on third-quarter and fourth-quarter guidance for both companies. The apparel stocks are facing growing pressure amid a weakening consumer, excess inventory and a stronger dollar. Telecommunications stock Lumen Technologies dropped 45% this year. Zero percent of analysts covering the stock have a buy rating on the company. At one point this month, Lumen traded at lows not seen since January 1989. Other companies covered in this list include cruise line stock Carnival , software company Cerence and mattress maker Sleep Number .
© heardonwallstreet.com