Warner Chilcott Shares Popped: What You Need to Know

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of pharmaceuticals specialist Warner Chilcott (Nasdaq: WCRX  ) rose more than 10% in early trading and remained up nearly that much at the close.

So what: We don't know exactly what caused the rally, but an ongoing unwinding of short positions in the stock may be partly to blame. On Monday, Reuters reported that Warner enjoyed the second-largest decline in short interest during the second-half of August.

Now what: Shorts redeemed more than 4.4 million shares between Aug. 15 and 31, down 58%.  Capital IQ shows similar data. The implication? A massive short squeeze has fueled returns recently. Fundamentals and valuation will have to do the job over the long term. Do you agree? Disagree? Please weigh in using the comments box below.

Interested in more info on Warner Chilcott? Add it to your watchlist.

Fool contributor Tim Beyers is a member of the Motley Fool Rule Breakers stock-picking team. He owned shares of Apple and Google at the time of publication. Check out Tim's portfolio holdings and Foolish writings, or connect with him on Google+ or Twitter, where he goes by @milehighfool. You can also get his insights delivered directly to your RSS reader.

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Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On September 14, 2011, at 9:13 PM, project39 wrote:

    Two things come to mind: the stock is crazy oversold; an executive of the company made a presentation at the Morgan Stanley Global Health Care Conference today.

  • Report this Comment On September 15, 2011, at 2:39 AM, runswithbulls wrote:

    Warner Chilcott is expected to initiate payment of a regular dividend this year. Although I haven't seen a formal announcement, I plan to buy WCRX this year.

    Runswithbulls

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