5 Stocks You Love to Hate

A bullish market doesn't mean that all bears go into hibernation.

Short sellers were loading up on their pessimistic wagers even as the market was barreling toward its best quarterly rally in nearly three years.

Short interest rose 2% on the New York Stock Exchange from the end of February to mid-March. The number of stocks sold short climbed 2.5% in that time on the tech-heavy Nasdaq.

Speculators feeling that individual securities are heading lower take short positions, which essentially means selling shares they don't own and buying them back later to zero out their positions. Let's take a closer look at some of the stocks with unusually large increases in short positions.

Company

Feb. 29, 2012

March 15, 2012

Sirius XM Radio (Nasdaq: SIRI  ) 285.8 million 307.8 million
Activision Blizzard (Nasdaq: ATVI  ) 25.1 million 29.2 million
Groupon (Nasdaq: GRPN  ) 19.0 million 21.7 million
Green Mountain Coffee Roasters (NYSE: GMCR  ) 21.2 million 25.1 million
Nokia (NYSE: NOK  ) 217.1 million 238.6 million

Source: Barron's.

These names should be very familiar to you.

  • An increase in Sirius XM Radio shorting is intriguing since it happened during the same time frame that ownership restrictions were relaxed for its preferred stake investor that may -- or may not -- decide to increase its stake in the satellite radio company.
  • Who cares if World of Warcraft gamers are bolting? Activision Blizzard has fresh installments in its Diablo and Call of Duty franchises rolling out later this year.
  • Kudos to the Groupon shorts, piling on ahead of Monday's 17% tumble resulting from accounting problems at the daily deals leader.
  • Green Mountain shorts grew in number as fears increased of renewed competition for the Keurig company. I wonder if that trend reversed when it made nice with Starbucks later in March.
  • Finally, we have Nokia taking a hit despite the potential promise of the Lumia 900 handset that hits the market this weekend.

Hate is such a strong word
Just because a stock is heavily shorted doesn't mean that it's going down. In fact, many bulls often see this as a good thing. A whiff of good news can send these stocks rallying through a short squeeze with bears rushing to close out their positions and pushing the shares higher along the way.

If you're still in the mood to go short, check out a new report detailing a pair of "too small to fail" stocks that the government won't let collapse. It's a free report, but it won't be around forever. Check it out now.

The Motley Fool owns shares of and has written calls on Activision Blizzard. Motley Fool newsletter services have recommended buying shares of Activision Blizzard, Nokia, and Green Mountain Coffee Roasters. Motley Fool newsletter services have recommended creating a lurking gator position in Green Mountain Coffee Roasters and a synthetic long position in Activision Blizzard. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.

Longtime Fool contributor Rick Munarriz calls them as he sees them. He does not own shares in any of the stocks in this story, except for Green Mountain. Rick is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early.


Read/Post Comments (4) | Recommend This Article (1)

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 April 04, 2012, at 4:51 PM, doubting wrote:

    Few people realize that Sirius XM as a joint company is still in its infancy. Most of the folks do not even know that Sirius and XM has been one company for almost four years.

    The only thing that is true about sirius xm is that it is established in the auto dashboard like no one else today and no one else in the future. All other aspects like retail, used car market and 2.0 technologies are either just emerging or changing dramatically (retail).

    I have no doubt whatsoever that in the next two years Sirius will cover between 90% and 100% of meaningful used cars dealerships. As the result, this market segment will contribute at least 30% of siri's subscriber growth. This is why it is obvious that siri, in spite of potentially slightly higher churn, will be adding at least 2M subs annually throughout this decade. We are just entering the realm of very large numbers, much higher ARPU and significantly reduced SAC due to the used car market contributions.

    2.0 technology with on demand and personalization features will make siri as versatile as any peripheral competitor and as ubiquitous as terrestrial radio. We will be able to listen not only to music of our choice but also take advantage of siri's phenomenal show and sports archives.

    The above and many other factors like hundreds of millions from commercials are turning the company into a bonanza as we speak. Not to see this is just stupid. This is why siri needs to stay its course without being distracted by nay sayers and manipulators. For its prosperity, the company needs Liberty as we need a station on the Venus.

    Any reasonable investor who stays put and shuns the background noise of cheap experts on sites like Seeking Alpha with their notorious ignorant psychotic self indulgent duet of Messrs. Pendola and Kaine supported by a choir of falsely signing yes men stand to be rewarded lavishly for their soberness and patience.

  • Report this Comment On April 05, 2012, at 1:03 PM, robmacfool wrote:

    No RIMM?

  • Report this Comment On April 28, 2012, at 6:39 PM, thesmartestfool wrote:

    Those who will try to short ATVI in the month of May should beware. Diablo III will release on May 15th, and comprehensive sales numbers for the long awaited title will be released soon thereafter.

    Folks who try to short the stock after the bounce it will have right after earnings are released on May 9th will find themselves in the very unenviable position of risking getting caught by a second bounce the stock will likely experience after sales figures for Diablo III are released shortly after May 15th.

    Analysts initially expected sales of Diablo III to be in the 5 million range over the course of the game's lifetime. VZ chartz shows pre-orders are close to 600K right now with three weeks remaining to launch. These sales figures likely do not capture digital sales through ATVI's own battle.net. Additionally reviews of the Diablo III beta have been good.

    For who've already established short positions in ATVI for the month of May, I'd highly recommend covering immediately...

  • Report this Comment On April 28, 2012, at 6:42 PM, thesmartestfool wrote:

    Sorry, the comment above should have said "VG Chartz"... Also, if Diablo III is later announced for release on consoles, then sales should rival those of Skyrim, and the stock price should skyrocket...

Add your comment.

DocumentId: 1855000, ~/Articles/ArticleHandler.aspx, 4/21/2014 8:27:02 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement