20 stocks likely to lose money even if the bull market continues

Certain stocks are such poor bets that they are likely to lose ground even in bull markets.

These "loser" stocks are ones that are difficult to borrow in the share-lending market and therefore hard to sell short. This throws off balance the normal equilibrium between buyers and sellers, resulting in significant overvaluation.

That is the strong conclusion of a study that started circulating late last year in academic circles. Entitled "Inefficiencies in the Securities Lending Market," the research was conducted by Kent Daniel of Columbia Business School, Alexander Klos of Germany's Kiel University and Simon Rottke of the University of Amsterdam. Daniel was formerly Goldman Sachs's co-chief investment officer.

The proof of the pudding is in the eating. Soon after the research began circulating, I focused one my columns on a list of 22 stocks that the study would have concluded were good bets to lag the market in 2026. Since that column was published, those stocks' average return (through Aug. 26) was a loss of 3.0%, according to LSEG data, in contrast to the S&P 500's SPX gain of 12.0%. A negative "alpha" of 15 percentage points over just eight months' time is very noteworthy.

This market-lagging performance is not a fluke. In their study, the researchers reported the performance of a hypothetical portfolio that each month between 2010 and June 2025 owned all U.S. stocks that, at the end of the prior month, had borrow costs greater than 50%. This portfolio produced a negative alpha of 81.4% annualized.

I am unaware of any other stock-selection approach whose annualized alpha — either positive or negative — is this far from zero. And in one sense the researchers' finding is too good to be true, since they reported that this hypothetical portfolio had an alpha close to zero after paying the stocks' sky-high borrow costs. So the best you can do with such stocks is to avoid them, or sell them immediately if you're unlucky enough to be holding them.

There are just three stocks in the Russell 3000 index that have current borrow costs greater than 50%: Livewire Group LVWR, GD Culture Group GDC and Swarmer SWMR.

The new study found that the best way to profit from their findings is to focus on stocks with high, but not too high, borrow costs — between 10% and 50% annualized, according to the authors. Taking this finding to heart, I constructed the table below of all stocks within the Russell 3000 index with market caps above $100 million and whose borrow costs as of Aug. 26 were in this moderately high range. The stocks are listed in descending order of their current borrow cost.