All four of the stocks in today's discussion have had their Short Term PowerRatings downgraded as of the most recent close. That marks these stocks as among those most likely to disappoint investors with their performance over the next few days.

The reason for highlighting these stocks is two-fold: first, it is to warn those who may be holding these stocks, and already losing money, that there is a good chance that they will lose more money in the near-term if they continue to hold these four names.

The second reason is for the future. All four of these stocks have Short Term PowerRatings of 3. And while stocks with Short Term PowerRatings of 3 are likely to underperform the average stock over the next five days, that fact does not necessarily make them excellent short candidates at this point.

Our research into individual stock behavior in the short term, research that involved millions of simulated trades between 1995 and 2007, showed us that the best stocks to actually bet against were the worst of the worst, the stocks with Short Term PowerRatings of 1 or 2.

We found that stocks with Short Term PowerRatings of 1 or 2 were particularly poor performers. Stocks with PowerRatings of 2 performed worse than the average stock over the following five days, while stocks with PowerRatings of 1 actually underperformed the average stock by nearly 5 to 1.

So the second reason for keeping an eye on stocks with Short Term PowerRatings of 3 is that they are closer to being stocks with Short Term PowerRatings of 1 than most other stocks. In other words, while not necessarily ready to be shorted, 3-rated stocks are potentially vulnerable to further PowerRatings downgrades, including a downgrade all the way to 1.

But even if their PowerRatings fall no further, our research revealed that stocks with Short Term PowerRatings of 3 have achieved about 90% of the return of the S&P 500 over the next five days. That alone is a path to underperformance that traders would do well to avoid.

Shutterfly (SFLY | Quote | Chart | News | PowerRating)

Inverness Medical Innovations (IMA | Quote | Chart | News | PowerRating)

Alaska Communications Systems Group (ALSK | Quote | Chart | News | PowerRating)

Boston Private Financial Holdings (BPFH | Quote | Chart | News | PowerRating)

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David Penn is Senior Editor at TradingMarkets.com.