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 profits.
However, since the SEC has instituted a temporary ban on short-selling on hundreds of financial stocks -- a term that becomes more broadly defined daily -- short-sellers haven't had much to do. This week we'll take a look at companies on the New York Stock Exchange with shares short representing the largest percentage of a company's float. But this week we'll also see whether the short ban is having any impact on keeping the shares afloat.
Combining that with the collective intelligence of Motley Fool CAPS, we'll see which of these stocks Fools believe have the power to make short work of short-sellers.
|
Company
|
Shares Short-Sept. 15
|
% of Float
|
CAPS Rating
(5 max)
|
Share Price Sept. 26
|
Share Price Sept. 18
|
% Change
|
|
Downey Financial (NYSE: DSL )
|
14.2
|
75.0%
|
*
|
$2.03
|
$2.20
|
(7.7%)
|
|
FirstFed Financial (NYSE: FED )
|
8.3
|
71.7%
|
*
|
$10.04
|
$17.24
|
(41.8%)
|
|
MarineMax (NYSE: HZO )
|
10.0
|
58.6%
|
*
|
$7.75
|
$8.78
|
(11.7%)
|
|
Greenhill
|
8.3
|
58.6%
|
***
|
$81.82
|
$85.00
|
(3.7%)
|
|
Life Time Fitness
|
20.0
|
57.8%
|
**
|
$32.39
|
$39.50
|
(18.0%)
|
|
Beazer Homes (NYSE: BZH )
|
20.1
|
55.2%
|
*
|
$6.18
|
$7.45
|
(17.0%)
|
|
Hovnanian (NYSE: HOV )
|
27.8
|
55.1%
|
*
|
$8.59
|
$8.53
|
0.7%
|
|
Tempur-Pedic (NYSE: TPX )
|
34.2
|
53.2%
|
****
|
$12.74
|
$12.70
|
0.3%
|
|
Landry's Restaurants
|
4.8
|
49.0%
|
*
|
$15.58
|
$13.28
|
17.3%
|
|
Standard Pacific (NYSE: SPF )
|
33.4
|
47.3%
|
*
|
$4.98
|
$4.78
|
4.2%
|
Sources: wsj.com. Share counts in millions.
Float = shares outstanding, minus shares controlled by insiders, restricted stock, and shares held by 5% owners. Short-selling ban went into effect Sept. 18.
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-plus-strong CAPS community offers a good place to start.
The short list
Only three of the 10 stocks above -- Downey, FirstFed, and Greenhill -- were on the protected list, yet they still declined by an average of almost 18%. The remaining seven companies that were left to the vagaries of the short-sellers were off only an average of 3% since the ban went into effect. While certainly not a scientific sampling, it seems to underscore the belief that weakness in stock prices had little to do with short-sellers and more to do with investor concern over an individual company's shaky finances.
Top-rated CAPS member TheGarcipian doesn't see the short-selling ban as being able to overcome the severe problems of the housing market that led to Downey Financial plummeting originally:
Going down with Downey... again. This company was hurting before the latest downturn in the housing & financial markets. I do NOT expect the current state of events to improve this company's bottom line. (I wish I'd thumbed this down yesterday as I'd planned -- darn work got in the way -- because it's getting pummeled today 9/26/2008, down nearly 50% from its price just two days ago).
Short-selling ban or not, CAPS member balancedinvestor doesn't see FirstFed Financial surviving. It simply has too many negative aspects working against it:
this will eventually go to 0 - modify as many loans as you can and change your game plan but the end result wil be the same :). CA, option arm, high NPAs, increasing broker deposits-all negatives
Some CAPS All-Stars have a hard time believing that homebuilder Hovnanian will be able to recover from the devastation that has wrecked the housing market. All-Star member floridabuilder says it might not go bankrupt, but because it is so weakened, Hovnanian will be unable to capitalize on any opportunities that may present themselves:
[Hovnanian] reported earnings a little bit ago and I figured I would throw some thoughts out there..... [Hovnanian] is not going bankrupt in 2008..... 2009 is a different story... given the Sept order trends of the builder group backlogs … are going to shrink....
....... a 3.5% gross margin before impairments means massive future impairments... which directly hits equity and their debt to equity ratio is 3rd worst in the industry.... their backlog is somewhere in the middle vs. their peer group (neutral opinion).... I would suspect that 1/2 to 2/3 of their owned lots are finished... so that will provide them positive cashflow through 2009
Don't sell yourself short
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 til it hurts, or short 'em til the sun don't shine? May the best argument prevail!
On Oct. 7, 2008, Fool Co-Founder David Gardner and his Motley Fool Pro team will invest $1 million in a portfolio designed to help you make money in any market. In the coming weeks, the team, relying heavily on proprietary CAPS "community intelligence" data, will establish long and short positions in a broad range of securities, including common stocks, publicly traded put and call options, and exchange-traded funds (ETFs). To learn more about Motley Fool Pro and to receive a private invitation to join, simply enter your email address in the box below.
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