May 14 (Bloomberg) -- ``Short-sellers,'' or people who make money when shares fall, have the widest choice of stocks since at least 1990, as corporate finances deteriorate and profit growth slows, according to a Societe Generale SA strategist.

Almost 100 European stocks currently fulfill the triple criteria needed to be a ``short'' candidate, the brokerage wrote in a report to investors dated yesterday. The requirements include an expensive share price, worsening company accounts, and lack of ``capital discipline'' on behalf of management. On average, the ``short'' list has had 20 stocks, Societe Generale wrote. In the U.S., the number has surged to 174 from 30.

``The opportunities are on the short, not the long side,'' the bank's London-based strategist James Montier wrote. ``Perhaps it is time to join the dark side.''

In a short sale, speculators sell borrowed stock on expectations its price will drop, allowing them to buy back the shares at a cheaper value and pocket the difference when paying back the loan.

The MSCI World Index tumbled 18 percent between November and mid-March, as the collapse of the U.S. subprime-mortgage market caused $335 billion in bank losses and pushed the world's largest economy close to a recession. The global index for stocks has rebounded 11 percent since March 17.

`Vilified'

Fund managers who are allowed to short-sell have fared better during the market slump. Between the start of November and March 17, Societe Generale's Wise Long-Short Index fell 10 percent. The index measures the performance of a group of stocks selected to outperform in short-sell and buy-hold strategies.

``Short sellers have been vilified pretty much since time immemorial,'' Montier wrote. ``This has always struck me as strange, the equivalent of punishing the detective rather than the criminal.''

Mark Lyttleton's BlackRock U.K. Absolute Alpha Fund, which can both hold and short-sell British stocks, rose 6.3 percent in the period, according to Bloomberg data. A Bloomberg peer group for European funds slipped 17 percent when measured in pounds, the data show, while the U.K.'s FTSE 100 Index declined 19 percent during the 4 1/2-month period.

``Shorting is a very powerful tool if you get it right,'' said London-based Lyttleton, who has short-sell positions on more than a dozen stocks at the moment. Shorting companies sensitive to an economic and a housing-market slowdown has helped the fund make ``quite a lot of money'' recently, he said.

`Short' Candidates

Shorting by itself has not been a success, according to the report. Such as a strategy in Europe has underperformed taking a long position in 18 of the past 22 years, Montier wrote. The brokerage's European short basket has yielded an average annual return of 6 percent since 1985, compared with a 13 percent annual increase for the market, the report said.

Societe Generale's basket of ``short'' candidates in Europe currently includes Hamburg-based Axel Springer AG, the region's biggest newspaper publisher, Norway's Petroleum Geo-Services ASA, the world's third-largest surveyor of oil and natural-gas fields, and Basel, Switzerland-based Straumann Holding AG, the world's second-largest maker of dental implants.

The list was drawn from companies outside the financials industry. There were no U.S. stocks mentioned in the report.

Montier, who wasn't immediately available to comment, specializes in so-called behavioral finance, or the effect of human biases in the markets. He was voted best global strategist in Thomson Extel's annual investor survey last year.

Societe Generale, based in Paris, is France's second-largest bank by market value.

To contact the reporter on this story: Alexis Xydias in London at axydias@bloomberg.net.

Last Updated: May 14, 2008 07:42 EDT