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Leverage is a double-edged sword by default, but it seems some management teams have simply disregarded this reality. Instead, these captains of industry feel that the only way they can fuel company growth is through debt. Now this may work from time to time, but when the economy weakens and leverage is running high, this is just asking for trouble. That is why we now see bearish momentum in these names today, but then again, there should be little surprise, so watch out below.

Financial leverage, also known as the Equity Multiplier, illustrates how a firm is financing its assets. The lower the number, the more a firm is financing its assets internally through stockholder equity. The higher this metric is, the more the firm is relying on debt to finance its assets.

We first looked for stocks trading operating with a substantial amount of leverage (Financial Leverage > 5). From this narrowed list of candidates, we looked for companies trading near their 52-week lows and posting bearish momentum by underperforming the SandP 500 over the last three months. We did not screen out any sectors or market caps.

The list is ranked from worst to least worst by 3-month return:

1. Incyte Corp Ltd. (INCY)

Sector

Healthcare

Industry

Biotechnology

Market Cap

$1,739M

Beta

2.47

The company develops small molecule drugs to treat serious unmet medical diseases. The company is operating with a financial leverage ratio of 113.26. INCY is only 9.46% above its 52-week low, and has fallen by -21.04% in value over the last three months. The short interest was N/A as of 10/14/2011.

2. Mizuho Financial Group Inc. (MFG)

Sector

Financial Services

Industry

Banks - Global

Market Cap

$30,610M

Beta

1.10

The company offers financial services around the world. The company is operating with a financial leverage ratio of 37.24. MFG is only 1.44% above its 52-week low and has fallen by -13.80% in value over the last three months. The short interest was N/A as of 10/14/2011.

3. National CineMedia, Inc. (NCMI)

Sector

Consumer Cyclical

Industry

Marketing Services

Market Cap

$666M

Beta

0.87

The company offers advertising and event services. The company is operating with a financial leverage ratio of 25.71. NCMI is only 7.67% above its 52-week low and has fallen by -16.56% in value over the last three months. The short interest was 3.70% as of 10/14/2011.

4. Mitsubishi UFJ Financial Group. (MTU)

Sector

Financial Services

Industry

Banks - Global

Market Cap

$61,238M

Beta

1.11

The company offers financial services to both retail and corporate clients all over the world. The company is operating with a financial leverage ratio of 25.67%. MTU is only 6.65% above its 52-week low and has fallen by -14.60% in value over the last three months. The short interest was N/A as of 10/14/2011.

5. AMC Networks Inc. (AMCX)

Sector

Commun Services

Industry

Pay TV

Market Cap

$2,337M

Beta

0.00

The company is operating with a financial leverage ratio of 23.65. AMCX is only 9.98% above its 52-week low and has fallen by -12.29% in value over the last three months. The short interest was N/A as of 10/14/2011.

6. Bank of Ireland - Governor and Co. (IRE)

Sector

Financial Services

Industry

Banks - Regional - Europe

Market Cap

$961M

Beta

4.77

The company offers a variety of banking and finance-related services. The company is operating with a financial leverage ratio of 22.78%. IRE is only 8.31% above its 52-week low and has fallen by -58.82% in value over the last three months. The short interest was N/A as of 10/14/2011.

7. National Bank of Greece. (NBG)

Sector

Financial Services

Industry

Banks - Regional - Europe

Market Cap

$2,569M

Beta

2.28

The company is offers a variety of financial services ranging from retail banking to investment banking. The company is operating with a financial leverage ratio of 13.35. NBG is only 7.16% above its 52-week low and has fallen by -58.98% in value over the last three months. The short interest was N/A as of 10/14/2011.

8. Banco Latinoamericano de Expor. (BLX)

Sector

Financial Services

Industry

Banks - Regional - Latin America

Market Cap

$603M

Beta

1.11

The company offers trade financing to commercial banks. The company is operating with a financial leverage ratio of 8.60. BLX is only 9.72% above its 52-week low and has fallen by -7.01% in value over the last three months. The short interest was 3.90% as of 10/14/2011.

9. Portugal Telecom SA. (PT)

Sector

Commun Services

Industry

Telecom Services

Market Cap

$6,183M

Beta

0.83

The company offers telecom and related services in Brazil and Portugal. The company is operating with a financial leverage ratio of 6.91. PT is only 6.36% above its 52-week low and has fallen by -16.69% in value over the last three months. The short interest was N/A as of 10/14/2011.

10. Veolia Environnement SA. (VE)

Sector

Industrials

Industry

Waste Management

Market Cap

$7,058M

Beta

1.88

The company offers environmental management services. The company is operating with a financial leverage ratio of 6.62. VE is only 8.99% above its 52-week low and has fallen by -36.62% in value over the last three months. The short interest was N/A as of 10/14/2011.

We hope this list helps as investors do their own due diligence and research on highly leveraged companies with bearish momentum.

Source: 10 Highly Leveraged Stocks With Bearish Momentum Pulling Them Lower