The strategy makes sense when you consider K-Mart and Wynn Dixie.

There are others. Just two fairly recent examples.

Both lost much more than 70 percent of value. Both went bankrupt. Shareholders lost all. (Shareholders are as junior as they come)... Buying and holding either of them soon afterwards would have made you a millionaire.

Well after reading the header I am confused, you want to find stocks with a high probability of going bankrupt, and then take a long position in the stock? Is this like going to the horse races and betting on the long shots to win? I am not sure this makes sense in ether case. Will not your losses be very high? Anyway here is a web page you may be interested in, check out the .pdf file at the bottom of the page. The formula should help you find stocks that will fail. You may want to change your mind about shorting the stock though. There should be more profit in shorting the stocks. http://www.defaultrisk.com/pp_score_14.htm

Checking in. This place may come in handy if the other board shuts down, or even if it doesn't. Now we can post replies to Zeev. Your initial post is going to throw a lot of people. I had to read it about 6 times before it made sense, the whole point being doing what is not allowed.

iavdbtr
^^^^^^^Looks like some new kind of earnigs description.

Income After Very Deceptive Bogus Tax Refund

So basically what you hope to achieve here is to pick a company whom your system believes will bounce before it goes under?Most times these companies will be under $5 and supposedly not shortable.