Since everyone loves a winner, it's reasonable to assume that everyone hates a loser -- everyone but short-sellers, at least. These contrarian investors bet that hot stocks are primed to fall, aiming to turn their pessimism into potential profits.
This week, let's look at companies on the New York Stock Exchange with the largest decline in the number of shares sold short. Combining that with the collective intelligence of Motley Fool CAPS, we'll see which of these companies Fools believe have the power to make short work of short-sellers.
|
Company
|
Shares Short-Aug. 15
|
Shares Short-July 31
|
% Change
|
% of Float*
|
CAPS Rating
(out of 5)
|
|
Halliburton (NYSE: HAL)
|
40.6
|
55.4
|
(26.78%)
|
4.7%
|
****
|
|
Ford (NYSE: F)
|
311.3
|
326.0
|
(4.51%)
|
17.8%
|
*
|
|
Motorola (NYSE: MOT)
|
43.4
|
57.3
|
(24.28%)
|
1.9%
|
**
|
|
Advanced Micro Devices (NYSE: AMD)
|
93.4
|
106.9
|
(12.56%)
|
16.8%
|
**
|
|
Merrill Lynch (NYSE: MER)
|
42.3
|
54.9
|
(22.99%)
|
4.7%
|
*
|
|
Bank of America (NYSE: BAC)
|
112.8
|
125.0
|
(9.82%)
|
2.6%
|
***
|
|
Lehman Brothers (NYSE: LEH)
|
70.6
|
82.1
|
(14.04%)
|
10.5%
|
*
|
|
Lowe's
|
37.8
|
49.1
|
(23.00%)
|
2.6%
|
***
|
|
Home Depot
|
58.7
|
69.5
|
(15.54%)
|
3.5%
|
**
|
|
AMR
|
36.7
|
47.4
|
(22.44%)
|
15.2%
|
*
|
Sources: wsj.com. Share counts in millions. *Shares outstanding, minus shares controlled by insiders, restricted stock, and shares held by 5% owners.
Of course, this isn't a list of stocks to buy -- or short! These stocks could have serious problems that warrant their short interest, but they might also be stricken by short-term troubles. Only Foolish due diligence will tell you for certain; our 115,000-strong CAPS community offers a good place to start.
The short list
Along with other oil industry plays, Halliburton's share price has declined since the beginning of July as oil prices have fallen. Yet the oil services company stands to gain from the still-to-come boom in deepwater drilling. With the number of rigs increasing, Halliburton's shares may climb. CAPS member PizzeriaMan writes that both it and rival Schlumberger will profit in the years ahead:
Slightly inferior financials compared to its biggest rival, SLB, except for the P/E ratio. However, both HAL and SLB will benefit from a hungry planet's thirst for oil & gas over the next few years.
Expected to be the next financial institution to fail after Bear Stearns collapsed, Lehman Brothers has held on -- sometimes by its fingertips, it seems -- and rumors that it may sell some or all of its business have created a surge in interest. But it's cutting about 1,500 employees, which should make it a leaner operation. CAPS member anchak sees this as "end game" positioning:
End game pick. ... It'll either fall flat and go against me big time .....or else ....This is the biggie about to fall.
One thing about the Korea deal - they actually expressed a lot of concern on the asset quality. Given the way the sovereign funds have been burnt - I would exact a huge discount ( aka JPM-Bear) , if I was in this position - Like forward sell Nurberger - and pay 10% premium for the whole company or something - ie [10 cents] to the dollar.
Have the automakers gotten religion soon enough to stave off catastrophe? Ford, whose F-150 pickup truck was the best-selling vehicle in the U.S. for 17 years until it was dethroned by the Honda Civic, is trying desperately to retool its plants to produce smaller cars and even more fuel-efficient pickups. CAPS member auctiondude still thinks Ford has the potential to remodel itself before it runs out of money:
US auto makers have been forced to WAKE UP! Is it [too] little [too] late? I don't think so. Watch these US companies come up with great innovations. This will be a huge drama as companies fight back to the "black" before they run out of cash.
For Bank of America, the triumvirate of consumer finance remains credit cards, mortgages, and bank accounts. With the Countrywide acquisition completed, the Income Investor recommendation will now have all three sectors under its wing, though the mortgage business may take some time to pay off. CAPS member cowbellpresident expects Bank of America will eventually get rid of the toxic stuff it acquired, leaving it with just the prime real estate, which will once again begin churning out profits:
Countrywide will prove to be very profitable in the long run. Housing will turn around and BAC will have tremendous cash flow. BAC will spin off … debt of CFC and keep the pay dirt. In Q2 of 2008, which is arguably the zenith of the credit crisis, BAC turned out something near .72/share profit-and has not had to cut its dividend when virtually all competitors have cut dividends.
Speak up
It pays to start your own research on these stocks on Motley Fool CAPS. Read a company's financial reports, scrutinize key data and charts, and examine the comments your fellow investors have made -- all from a stock's CAPS page. Then share your views with the CAPS community: Squeeze 'em till it hurts, or short 'em till the sun don't shine? May the best argument prevail!
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