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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.
These companies on the Nasdaq stock exchange are among those with the largest percentage increases in shares 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.
|Majesco Entertainment (Nasdaq: COOL )||1.1||0.5||102.1%||3.2%||***|
|Abraxas Petroleum (Nasdaq: AXAS )||11.4||6.0||88.8%||15.0%||*|
|Expedia (Nasdaq: EXPE )||23.2||13.9||66.9%||11.9%||*****|
Sources: wsj.com. Share counts in millions.
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 170,000-strong CAPS community offers just such a good place to start.
The short list
It's understandable why short-sellers want to target Majesco Entertainment. The video game maker is riding high on sales of Zumba Fitness, the Brazilian aerobic exercise program for the Wii, and has plans to launch a number of titles for the Nintendo 3DS as well as for social-media outlets like Facebook. Its stock is at 52-week highs.
No doubt short-sellers are looking at the general drop in video game sales, which was much steeper than expected. According to the market researchers at NPD Group, overall retail software sales fell 16% in March, worse than the 8% to 10% that had been expected.
What they're missing, though, is that Majesco's target market, specifically the 3DS platform, had a fundamentally sound launch. Despite having a $100 higher price point and getting launched during a nonholiday period, the 3DS sold only 100,000 units fewer than the older DS did during the start of the Christmas season. And Zumba Fitness was the top-selling game in the U.K. for the second consecutive week, ending April 16. It's still enjoying wide popularity.
As highly rated CAPS All-Star IBDvalueinvestin points out, Zumba Fitness remains a top seller in many places. While nearly one in five CAPS members see it underperforming the market averages, you can play the game on the Majesco Entertainment CAPS page and let us know whether you think it's fit enough to succeed.
No small thing
Even though its fourth-quarter financials came in below analyst expectations, Abraxas Petroleum reported a loss that was narrower than a year ago. It's steadily moving to regain profitability and as many others before it have done, notably Chesapeake Energy and EOG Resources (NYSE: EOG ) , Abraxas is focusing more on its oil reserves. It will be focusing first on Texas oil holdings and then on the Williston Basin and Wyoming. It has stakes in the growing Niobrara region, as well as the more established Bakken play.
Wall Street is unanimous in its opinion that that stock will go on to outperform the broad indexes, and 97% of the nearly 700 CAPS members rating the energy play agree. Add it to your watchlist to see whether it can hit a gusher still.
Squeezed to death
The announced spinoff of Expedia's media and advertising division, TripAdvisor, has investors enthused about the online travel agent's prospects. Accounting for 15% of revenues and more than a third of Expedia's profits, TripAdvisor looks like it could be a winning investment on its own and should allow the OTA to return significant value to shareholders. Yet the competition from Google's (Nasdaq: GOOG ) ITA Software acquisition means there will be a tough fight in the space, making this a good time for Expedia to shed TripAdvisor.
Although fellow OTA Orbitz Worldwide (NYSE: OWW ) remains locked in a pitched battle with American Airlines parent AMR (NYSE: AMR ) over the airline's desire to route fare bookings through its in-house reservation system, Expedia reached a tentative agreement with the airline earlier this month.
While analysts view Expedia favorably, just 80% of the CAPS members rating the OTA think it can beat the market. Add the stock to the Fool's free portfolio tracker to find out if it's able to take flight.
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!