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.
However, since the SEC has extended the 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 Nasdaq 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 firms Fools believe have the power to make short work of short sellers.
|
Company
|
Shares Short-Sep 15
|
% of Float
|
CAPS Rating (out of 5)
|
Share Price Oct 3
|
Share Price Sep 18
|
% Chg
|
|
Acura Pharmaceuticals
|
0.9
|
139.1%
|
*
|
$7.15
|
$7.50
|
(4.7%)
|
|
Cal-Maine Foods (Nasdaq: CALM )
|
12.7
|
99.9%
|
****
|
$27.75
|
$39.31
|
(29.4%)
|
|
Jos. A. Bank Clothiers (Nasdaq: JOSB )
|
15.4
|
93.7%
|
***
|
$33.31
|
$35.82
|
(7%)
|
|
Conn's
|
6.8
|
75.9%
|
****
|
$14.78
|
$23.30
|
(36.6%)
|
|
NutriSystem (Nasdaq: NTRI )
|
17.7
|
69%
|
****
|
$17.63
|
$19.96
|
(11.7%)
|
|
CORUS Bankshares (Nasdaq: CORS )
|
20.8
|
68.9%
|
*
|
$4.20
|
$7.35
|
(42.9%)
|
|
NetLogic Microsystems
|
10.5
|
58.8%
|
**
|
$27.37
|
$34.40
|
(20.4%)
|
|
Blue Nile (Nasdaq: NILE )
|
8.1
|
57.7%
|
***
|
$37.49
|
$49.25
|
(23.9%)
|
|
FuelTech (Nasdaq: FTEK )
|
9.3
|
56.9%
|
****
|
$17.25
|
$23.39
|
(26.3%)
|
|
True Religion Apparel (Nasdaq: TRLG )
|
12.8
|
56%
|
**
|
$23.60
|
$29.64
|
(20.4%)
|
Sources: wsj.com. Share counts in millions. Short selling ban went into effect Sept. 18.*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. These stocks could have serious problems that warranted 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 just such a good place to start.
The short list
It's interesting that only one of the 10 stocks list made the SEC's protected list, yet its shares have performed the worst since the shorting ban went into effect. CORUS Bankshares has seen the amount of shares short decline steadily since mid July, with a concomitant increase in its share price. Yet after the ban was imposed, its stock has plummeted nearly 43%. While certainly not a scientific sampling, it seems to underscore the belief of some that weakness in stock prices had little to do with short sellers and more to do with investor concern over an individual company's shaking finances.
While not many investors like CORUS these days, CAPS member Roscoe81082 thinks there are enough indicators present to suggest a rebound and with the recent passage of the bailout bill it might even be one of those allowed to unload some of its bad bets.
Corus had a few bad breaks with their investment in Condos, especially in the Florida market. However, with the ownership still intact and Institutional and Insider Ownership is at a very high level, you have to view this as a sound investment.
Additionally, with the pending bailout of bad loans by the Federal Government, Corus may even receive a "Do Over" on a few of its loans. Obviously we'll have to wait to see what the terms are regarding the bailout of bad loans, but currently this definitely appears to be a good buy.
With all the job losses occurring on Wall Street these days, you might expect a men's retailer like Jos. A. Bank Clothier to be doing worse, yet top-rated CAPS All-Star member Imperial1964 pointed out back in August that the retailer was in very good financial shape which made the high short interest curious.
Incredible balance sheet. By the numbers, an incredible business. 22% held by insiders and no net insider selling.
I wonder why 92% of shares are short, primarily by institutional investors? Perhaps some funds are shorting the entire retail sector?
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 till it hurts, or short 'em till 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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