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5 Stocks That Bears Are Avoiding

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Fear is never universal.

Yesterday I went over five stocks with short interests at 52-week highs. Today I'm going to look at the other end of the spectrum.

There are plenty of stocks where the worrywarts have been running for the hills. The five stocks that I'll be going over here are either at or near their recent lows when it comes to the number of shares sold short.

Why are fewer investors betting against these companies? Every stock has a unique story to tell. For investors, there are two opposing ways to approach the data.

A bull will see it as validation. The market agrees with the sentiment. A bear can approach this list from the contrarian perspective. Unlike yesterday's list of prime candidates for a short squeeze, there are apparently fewer skeptics to sway here.

Since the stock exchanges offer up short interest twice a month, giving us 24 snapshots a year, let's look at the mid-February tallies that were provided late last week and compare them to the bearish wagers placed just six months earlier.


Feb. 15, 2013

Aug. 15, 2012

Netflix (NASDAQ: NFLX  )

8.1 million

14.3 million

Facebook (NASDAQ: FB  )

25.4 million

88.0 million


11.4 million

14.1 million

Lennar (NYSE: LEN  )

32.8 million

33.7 million

SodaStream (NASDAQ: SODA  )

7.7 million

8.9 million

Source: Barron's.

Feeding the bears
Netflix has seen its stock more than triple over the past six months, forcing a lot of bears to scramble and cover their short positions.

Cynics will argue that now is the best time to take a stance against the leading video service, but Netflix continues to grow its global audience and ink the content deals that make it difficult for anyone else to catch up.

Netflix now has more than 33 million streaming customers worldwide. The valuation is stiff, sure, but there doesn't seem to be any chance to derail the niche leader after last month's debut of House of Cards positions Netflix as a vastly cheaper yet far more thorough HBO.

Facebook was a widely lampooned IPO last year, and it wasn't a surprise to see shorts balloon to 88 million three months after going public in May. Investors feared that the leading social networking website operator was going to suffer in the mobile migration. There were also reports of the site's popularity waning.

Facebook blasted through the concerns. Active monthly users have gone on to top 1 billion, and new mobile monetization efforts are turning the growing engagement of Facebook on smartphones and tablets an opportunity instead of a challenge.

MAKO Surgical shorts are near its 52-week low of 11.3 million.

MAKO is the company behind the RIO surgical robotics platform that is used for orthopedic procedures. Unlike Netflix and Facebook, which have been rallying, MAKO shares are trading near their lows.

MAKO's stock took a hit after the company warned of a slowdown in orders for new RIO systems a few months ago. Last week's updated outlook is cautious. MAKO sees itself selling less than 50 RIO systems this year with roughly 13,500 to 14,500 procedures performed on its machines through all of 2013.

However, since the stock has already shed more than two-thirds of its value over the past year, the shorts feel as if the easy money on the downside has already been made. Despite a lack of profitability, MAKO's still growing its revenue at a healthy pace, so it's not going away.

Lennar's sporting its lowest short interest since May of last year.

Homebuilders have been rocking lately. Home prices keep inching higher, and that's huge for residential developers that have to deal with component costs (unlike the market for existing homes, which has more pricing flexibility). Mortgage prices are also still near historic lows, giving home buyers more bang for their bucks.

Finally, we have SodaStream. Save for a dip to 7.4 million shares sold short at the end of last year, this is as low as the short interest has gotten for the company behind the popular home-based maker of carbonated beverages.

Fears that SodaStream's platform is a fad have been debunked. Not only is SodaStream's popularity on the rise, but its growth rate is actually accelerating. SodaStream recently posted a 55% surge in revenue in the holiday quarter, highlighted by a record 1.1 million starter kits sold. This naturally bodes well for the future.

The stock's attractive valuation -- SodaStream's fetching just 15 times next year's earnings, though its growing a lot faster than that -- is giving bears fewer reasons to keep comparing SodaStream to pet rocks and Furby dolls.

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Related Tickers

9/26/2016 2:50 PM
FB $127.64 Down -0.32 -0.25%
Facebook CAPS Rating: ***
LEN $42.92 Down -0.19 -0.44%
Lennar CAPS Rating: **
MAKO.DL $0.00 Down +0.00 +0.00%
MAKO Surgical CAPS Rating: ****
NFLX $94.49 Down -1.45 -1.51%
Netflix CAPS Rating: ***
SODA $26.82 Down -0.47 -1.72%
SodaStream CAPS Rating: **