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.
Here are top companies on the New York Stock Exchange 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.
|Qihoo 360 Technology (NYSE: QIHU )||3.6||1.6||127.9%||NM||**|
|Sunrise Senior Living (NYSE: SRZ )||5.0||2.9||71.2%||9.5%||***|
|Unilever (NYSE: UL )||1.7||0.6||184.8%||NM||*****|
Sources: wsj.com. Share counts in millions. NM = not meaningful.
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 a good place to start your research.
The short list
The IPO market had been hungry for Qihoo 360 Technology's new shares, which stopped the presses on their introduction, sending the stock soaring. It was priced at $14, opened at $27, and closed at $34 a share. Yet like "China's Facebook" Renren (Nasdaq: RENN ) , the taste is more like cotton candy: It quickly dissolves. Renren's shares have been almost cut in half since their debut and Qihoo's stock is down to $26 a stub.
Qihoo has something of an advantage, though, as it's the second-most-popular browser behind Microsoft's (Nasdaq: MSFT ) Internet Explorer. While it gives away the browser for free, it apparently does quite well supporting itself through advertisements and games. Revenues were up almost 80% last year.
CAPS All-Star aidourtroops sees strong growth for Qihoo 360, a point undoubtedly supported by many members in the CAPS community, as almost three-quarters of those rating the browser company believe it will outperform the broad market averages. You can browse through the Qihoo 360 Technology CAPS page and let us know whether you think it's a winner.
No small thing
Too far, too fast, and on the back of one-time gains may be the short-selling case against Sunrise Senior Living. The stock has enjoyed an incredible recovery after foundering in a desperate attempt to raise cash. Over the past year the stock has more than doubled and it's up 158% in the last six months alone.
At just seven times forward earnings estimates, Sunrise is valued at about half of what the market thinks National Healthcare (NYSE: NHC ) is worth and just a third of Capital Senior Living. Based on its growth prospects, though, the market is also saying it's fairly valued, which may mean the market has overpriced its rivals.
For CAPS member trishsym, an expanding demographic base will lead to a growing market for Sunrise's business:
On same page as other posters, this market segment is only going to grow given the baby boomers and given the success so far, they know what they're doing in this field. Look at historical prices of SRZ before the recession and it's an indication of where it can go
Squeezed to death
Honesty only gets you into trouble. What applies to marital infidelity also goes for telling the truth about inflation in China, as Unilever is quickly finding out. It recently warned that the commodities bubble was sending costs soaring and it was going to have to raise prices. Unfortunately for it, truth is apparently a casualty of China's death-grip on reality.
The government fined Unilever $308,000 for letting the cat out of the bag that inflation is an ever-present danger. If Beijing hasn't previously announced actions like that, then it's against the law to tell the people that inflation is going up and price increases are necessary. As the Fool's Rich Smith notes, the government is running around like the Red Queen yelling "off with their heads!" But it's really no different than the censorship it imposed on Google (Nasdaq: GOOG ) for having the temerity to allow individuals to search for phrases like "Tiananmen Square."
The "China problem" isn't what's attracting the shorts, though. Likely it's the actual higher costs the company is having to contend with, which led to price increases here at home and the announced ones in China. That will only ameliorate and not eliminate the margin erosion it's been suffering.
But CAPS member BKITU says consumer products like those Unilever sells both here and abroad will keep it in the public's good graces, if not the government's:
As long as there are more and more consumers being created by globalization, it's a good idea to be bullish on unsexy consumable goods produced and/or marketed by solid companies.
Add the stock to the Fool's free portfolio tracker to find out if the truth will set Unilever free.
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!