Everyone loves a winner. It's reasonable to assume, then, that everyone hates a loser. Yet with investing, that's not always the case.
Contrarian investors love to pick through stocks others have cast away. Value investors are the garbage divers of the marketplace. Conversely, when stocks have a big run-up, some investors like to bet against them. They're called short sellers, and they bet that a stock is primed for a fall.
What goes up must come down
Here's a list of stocks on the Nasdaq exchange that saw some of the largest decreases in short interest positions between August and September. We'll turn to the collective intelligence of the Motley Fool CAPS community to learn which of these stocks -- if any -- Foolish investors think have the power to continue making short work of short sellers. (I've updated the data to show the latest count of shares sold short.)
|
Company |
Shares Short, October |
Shares Short, August |
Change |
Total Shares Out |
October Short % of Total Shares Out |
CAPS Rating (Out of 5) |
|---|---|---|---|---|---|---|
|
Comcast |
45.6 |
113.2 |
(59.7%) |
3,090 |
1.47% |
** |
|
Microsoft |
77.4 |
97.2 |
(20.4%) |
9,380 |
0.82% |
*** |
|
Applied Materials |
35.4 |
50.3 |
(29.6%) |
1,380 |
2.56% |
*** |
|
Yahoo! |
58.1 |
62.3 |
(6.7%) |
1,340 |
4.34% |
*** |
|
Sirius Satellite Radio |
85.1 |
91.0 |
(6.5%) |
1,460 |
5.83% |
** |
Of course, this isn't a list of stocks to buy -- or short! Maybe these stocks still have some serious problems that warrant the once-high short interest. Maybe not. What do you think? Will they be squeezed?
Tapping the CAPS advantage
Over on CAPS, more than 70,000 investors are looking over these same stocks. Some they like, some they don't, and they all vote on how they feel. Sometimes, though, the stocks that CAPS players like cross swords with those that short sellers don't.
While the names on the list are familiar to us from weeks past, when their short interest levels shot up, we might understand why some members are still included. Sirius, for example, although it has experienced a decline in its short positions, still held a level of more than 5% of its outstanding shares. Even so, that represented only a little more than two days to cover, which shouldn't be a problem for the satellite-radio operator. With there being a gleam of hope that the proposed merger with XM Satellite Radio
Yet what might account for the huge drop in Comcast's short interest position? Many people have indeed vilified the cable-television operator, and its stock is off 25% since the beginning of the year. Yet analysts have recently pointed to its outstanding financial results and believe it is undervalued, though yesterday's earnings news had some observers turn tail and downgrade it further.
Seeming to anticipate Comcast's earnings release, CAPS player athenamike sees increasing top-line revenues eventually leading to growing earnings down the road:
Comcast's top line will continue to grow much more quickly than costs. They are essentially rolling out several products with small incremental capital expenditures. I expect around $3.50 in earnings in 5 years, which should translate into very nice returns.
It's Comcast's cable operations that attract xdogg. He thinks that, coupled with an extremely low share price, Comcast will outperform in the future: "Gotta love a solid company near its 52 week low. Comcast is not without its problems, but overall the company is a cash machine and is poised for outstanding growth over the next few years."
With the short sellers having abandoned this stock, it seems they might agree.
Speak up
You've heard from the CAPS All-Stars. Now it's your time for a star turn. Tell the CAPS community what you have to say. On Motley Fool CAPS, your opinion counts just as much as those of the short sellers'. Tell us what you think: Squeeze 'em till it hurts, or short 'em till the sun don't shine. May the best argument prevail!
