Looking for investing ideas with the backing of sophisticated investors? Keep reading -- we've done just that.
Shorting a share involves borrowing the share and immediately selling it with the agreement to buy it back and return it in the future. This is profitable only if the share price drops. In which case, the short-seller gets to keep the difference in value (minus a borrowing fee).
Thus, a pullback (short covering) on shorted shares means these traders are becoming more optimistic about the stock's near-term values.
Below, we list names that have seen a significant decrease in shares shorted month over month -- a sign these sellers think there is more upside potential than not.
"Buy" ratings from Deutsche
We created a list of stocks that have a buy rating by Deutsche Bank (meaning that analysts at Deutsche Bank think they will outperform).
It's common to look at the ratings banks have for stocks because the banks are presumed have some of the brightest minds in finance working for them. And a company stands behind their recommendation with heavy research and analysis.
Although ratings should be taken with a grain of salt, a "buy" rating is a notably strong recommendation.
Business section: Investing ideas
The screen below represents the two ideas mentioned above: short covering and "buy" ratings.
Do you think these stocks are on the rise?
List sorted by market cap. (Click here to access free, interactive tools to analyze these ideas.)
1. Hatteras Financial
2. Pan American Silver
3. Community Health Systems
4. Health Management Associates
5. American Axle & Manufacturing Holdings: Engages in the manufacture, engineering, design, and validation of driveline and drivetrain systems, and related components and chassis modules for automotive industry in the United States. Market cap at $687.77M, most recent closing price at $9.93. On 12/08/2011, Deutsche Bank had a Buy rating on the stock. Shares shorted have decreased from 7.74M to 7.07M over the last month, a decrease which represents about 1.09% of the company's float of 61.73M shares. Days to cover ratio at 4.8 days.
6. Goodrich Petroleum
List compiled by Danny Guttridge.
Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the stocks mentioned above. Analyst ratings sourced from Zacks Investment Research.
Kapitall's Rebecca Lipman and Danny Guttridge do not own any of the shares mentioned above. Data sourced from Yahoo! Finance.