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 and aim to turn their pessimism into potential profits.
This week, we'll look at companies on the New York Stock Exchange with the largest percentage of shares short compared to their floats. Combining that information 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, Dec. 31
|
Shares Short, Dec. 15
|
% Change
|
% Float
|
CAPS Rating (Out of 5)
|
|
Hovnanian Enterprises (NYSE: HOV )
|
21.1
|
21.6
|
(2%)
|
42.0
|
*
|
|
RSC Holdings
|
9.0
|
9.3
|
(2.3%)
|
40.2
|
*
|
|
Systemax (NYSE: SYX )
|
2.5
|
2.7
|
(7.8%)
|
36.4
|
*
|
|
Equity One
|
10.3
|
12.1
|
(14.7%)
|
35.9
|
*
|
|
Landry's Restaurants
|
2.5
|
2.6
|
(2.9%)
|
33.9
|
*
|
|
Beazer Homes (NYSE: BZH )
|
12.0
|
12.2
|
(2%)
|
32.9
|
*
|
|
FirstFed Financial (NYSE: FED )
|
3.7
|
4.3
|
(14.4%)
|
31.5
|
*
|
|
Macerich (NYSE: MAC )
|
23.6
|
24.0
|
(1.6%)
|
31.4
|
*
|
|
Mueller Water (NYSE: MWA )
|
9.0
|
9.0
|
0.6%
|
31.3
|
*****
|
|
Life Time Fitness
|
10.5
|
10.7
|
(2.1%)
|
31.2
|
*
|
Sources: wsj.com and Motley Fool CAPS. Share counts in millions.
Of course, this isn't a list of stocks to buy -- or short! 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 125,000-strong CAPS community offers just such a good place to start.
The short list
Home prices have fallen 23% nationally from their peak in 2006, while foreclosures rose 81% from 2007 to 2008. More than 2.3 million properties defaulted, got an auction notice, or were seized by lenders, according to RealtyTrac. With homebuilders such as Beazer reporting that closings fell by 52% in the fourth quarter and new home orders dropped 56%, there's little reason to expect the housing market for Hovnanian or Toll Brothers (NYSE: TOL ) to get better anytime soon.
A highly rated CAPS All-Star member, TheGarcipian, has had a dour outlook on Hovnanian for a few years now, and he reiterates what he said when he first looked askance at the homebuilder:
I've been riding this pig down to the slaughterhouse since 25 June 2007 when it was at $17.50/share. More contraction in the housing industry is still ahead, so I'm thumbing it down once again (this will be my 4th time doing so). [The] premise and sentiment [from my original pitch] still holds true.
What he wrote is too long to repeat here, so take a moment to read the entire pitch at CAPS.
Jump-start the business
You'd probably think the outlook for shopping centers wasn't much better than it is for housing, but CAPS All-Star TSIF admits that he's being contrary when he rates Macerich as an "outperform":
I'm going well against the tide here, but heck, I'm drowning already. Insider buying flagged this one for deeper research. I'm impressed at [Macerich's] comeback the last two weeks and wish I'd noticed them at $10/sh! Their ability to turn the [Mervyns acquisitions] to [Forever 21] and Kohl's anchor stores is stunning. ... Beat up, as with most [REITs] over debt concerns, [Macerich's] assurance of long term stability signals the opportunity for some high cost/return dividends as with any [REITs]. ... A few serious [ifs], but for [Macerich], management seems to know what it's doing. Even with retail outlets!
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 Jan. 12, Fool co-founder David Gardner, Jeff Fischer, and their Motley Fool Pro team began accepting new subscribers to their real-money portfolio service. Motley Fool Pro is investing $1 million of the Fool's own money in long and short positions in a range of securities, including common stocks, put and call options, and exchange-traded funds (ETFs). They also incorporate proprietary CAPS "community intelligence" data into their research. 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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