4 More Stocks Burning Their Shorts

Naysayers are losing a lot of money by betting against the wrong stocks these days.

On Monday I took a look at five companies that have posted healthy returns since checking in with recent highs in short interest on April 15.

There are far more than that.

Sirius XM Radio (NASDAQ: SIRI  ) closed at a five-year high yesterday. The satellite radio provider boosted its free cash flow guidance earlier this week, and strong auto sales should translate into healthy growth for the media giant that already serves a whopping 24.4 million subscribers.

You can bet that the worrywarts shorting 378.5 million shares of Sirius XM -- highest among all Nasdaq-listed companies -- in mid-April wish that they had covered.

The stock has rallied 11% in the 10 subsequent trading days.

Let's take a look at other publicly traded companies that have gone on to post double-digit percentage gains since recording recent highs in short interest activity.

Company 

Short Shares

April 15

April 30

Gain

Ruckus Wireless (NYSE: RKUS  )

3.4 million

$17.36

$19.30

12%

Boyd Gaming (NYSE: BYD  )

18.5 million

$8.53

$12.00

41%

Buckeye Technologies (NYSE: BKI  )

1.1 million

$29.01

$37.59

30%

Source: Barron's.

Feeding the bears
Ruckus Wireless went public in November, and short interest has been consistently climbing since mid-January.

Betting against the supplier of wireless systems for the mobile Internet infrastructure market seemed like a pretty good idea earlier this year. There was a dry spell a few weeks back where Ruckus closed lower for 12 consecutive trading days. You don't see that kind of pervasive bearishness too often.

However, investors are starting to buy back in ahead of next week's quarterly report. Ruckus posted better-than-expected earnings last time out in its first quarter as a public company.

Boyd Gaming soared last week after surprising the market with an adjusted quarterly profit. Analysts were holding out for a loss of $0.07 a share from the casino operator. Organic revenue growth has been a challenge, as all four of Boyd's markets posted declining revenue for the period.

However, returning to profitability sooner than projected is usually a good way to trigger a short squeeze.

Finally, we have Buckeye Technologies. It's easy to see why the maker of specialty fibers and nonwoven materials burned its skeptics. Georgia-Pacific announced a $1.5 billion deal to acquire Buckeye Technologies on April 24. The deal will cash out Buckeye Technologies investors at $37.50 a share.

The 1.1 million shares sold short aren't a lot, but it was the highest short interest on Buckeye Technologies since last summer.

Skepticism hurts
All four of these companies have their challenges, but clearly investors think that the pessimism has been too much over the past few days.

With so much of the financial industry getting bad press these days, it may be a "be greedy when others are fearful" moment. Not surprisingly, some of Warren Buffett's biggest investments are in the space. In the Motley Fool's free report, "The Stocks Only the Smartest Investors Are Buying," you can learn about a small, under-the-radar bank that's too tiny for Buffett's billions. Too bad, because it has better operating metrics than his favorites. Just click here to keep reading.


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