Regardless of market direction, regardless of the economy, there are a few companies out there that are already the walking dead. They can’t compete, or they’ve suffered from years of poor management, or their expenses have spiraled out of control due to rising cost of inputs, or they are just in the wrong business at the wrong time.

Even Buffett has said that the best management team in the world can’t save a business in a poor industry. He found this out all too well when he bought a struggling textile mill and failed to turn it around: Berkshire Hathaway. Ultimately, he gave up on the mill and stuck to insurance.

Hedge funds know all too clearly which stocks are going down the drain. When a stock is heavily shorted, there is only one reason: Hedge funds are gunning for it. They’ve done the research, they’ve spied on the CEOs and CFOs. They’ve rifled through the garbage cans in the company parking lot. They’ve pretended to b janitors while poking through the papers scattered on the COO's desk.

So here are the things we found in the three stocks below that are going to zero:

- Heavy short interest
- Declining revenues and margins
- A competitor that has become the industry leader by a wide margin
- Factors distracting management
- Heavy debt load so the company will not be able to tread water without restructuring itself and crushing shareholders
- Consistently missed analyst estimates
- Very few quality hedge funds as shareholders

Note: A high P/E ratio is not reason to short. Just because Baidu (BIDU) or Apple (AAPL) has a 100 times P/E doesn’t mean it’s a short. Once it's overvalued, if it continues to grow, it could easily grow even more overvalued. What you need to look for are the companies whose business is fundamentally flawed.

Here they are:

Circuit City (CC): Circuit City used to be one of the best. Jim Collins profiled the company in his classic book Good to Great. But with 15% of the shares short, it's time to take a look at why this company is most likely going to zero.

Revenues are down 7% year-over-year, and EBITDA came in at -$200 million. Analysts also expect the company to lose money next year, making it more difficult to pay down the $120 million in debt. Best Buy (BBY), with $2.7 billion in EBITDA, has clearly become the industry leader, crushing Circuit City. Last time I was in a Circuit City store (2005 in upstate N.Y.), the salesperson actually recommended I shop at Best Buy to find what I was looking for.

Circuit City has missed analyst estimates in two out of the past four quarters. Most important, management has not been able to keep its eye on the business, due to the offer from Blockbuster (BBI). My guess is Circuit City misses big on the next quarter. Almost all of its top shareholders are index-based mutual funds, so there's zero coverage from quality value funds despite the decline in stock price.

Advanced Micro Devices (AMD): Last week, AMD posted $1.35 billion in revenues, a sequential quarter-over-quarter decline of 10%, and it guided down for next quarter. Despite enormous technical creativity, AMD simply does not have the resources to compete with Intel (INTC). The myth of a duopoly in the chip space is over, and Intel is the winner.

AMD just replaced its long-time CEO, and it is trying to sell of two fab facilities in order to raise cash, despite raising $600 million just last November. Meanwhile, Intel is sitting on over $11 billion in net cash vs. AMD’s $3.5 billion in net debt. Intel can throw cash at any technical or competitive issue, while AMD is dealing with management turmoil, continued troubles integrating its acquisition of ATI Technologies, and cash management issues.

Raser Technologies (RZ): The basic numbers tell the story: $634 million market cap. $326,000 (yes, thousand) in revenues over the past year. -7.7 million in negative cash flow. $30 million in net debt, with no profit in the foreseeable future. Raser builds geothermal plants and hybrid vehicles. It has switched business plans, switched management teams and consistently failed to deliver on promises. Most likely, it will raise money via a dilutive financing that will hurt shareholders, and, if it can’t succeed in raising money, it will eventually go bankrupt, like many other companies before it that have failed to deliver.

A note from James Altucher:

Every weekend I send an email to Jim Cramer and several hedge fund managers about the most interesting portfolios posted on Stockpickr that week. Usually those portfolios not only list stocks according to a theme but also offer significant analysis as to why the stocks are cheap.

Here are some examples:

Stocks related to drilling the Marcellus Shale

MLPS with yields above 7%

Microcaps trading for less than tangible book

Stocks that do well after Hurricanes

Here's the challenge: Build a portfolio at Stockpickr.com with great analysis, and send me the link. Each great portfolio (with analysis) will get posted on TheStreet.com with your byline (as a "Stockpickr Guest Columnist") and will be included in my email I send to Jim and the other
hedge fund managers on my list.