5 Stocks You Love to Hate

It's not easy being a naysayer. Some of the major market indexes are trading near all-time highs, and betting against a company to profit from its decline when it falls by selling its shares short may seem like a bad wager. 

Short interest declined through the latter half of last month, but there were actually a few companies that hit new 52-week highs in bets placed against them. Let's take a close look at five companies with the largest number of shares sold short over the past year as of mid-April, according to the latest data from the exchanges.

Company

April 30

52-Week Low

Coca-Cola  (NYSE: KO  )

54.8 million

26.5 million

Zynga  (NASDAQ: ZNGA  )

64.7 million

21.4 million

Kandi Technologies  (NASDAQ: KNDI  )

5.7 million

0.7 million

Comcast  (NASDAQ: CMCSA  )

60.2 million

18.7 million

Capstone Turbine  (NASDAQ: CPST  )

47.8 million

33.9 million

Source: Barron's.

Feeding the bears
We can start with Coca-Cola. Growth has slowed dramatically at the world's largest beverage company. Folks are swearing off sugary soft drinks, and diversification into other beverage categories hasn't happened soon enough. Global unit case volume climbed a mere 2% in the latest quarter, with operating income and earnings declining slightly. Despite Coca-Cola's healthy 3% yield -- something shorts must pay out themselves on the stock that they're borrowing -- its short interest has more than doubled since last summer.

Zynga is playing Bears With Friends: The company behind FarmVille, Draw Something, and Words With Friends has fallen out of favor. Its business peaked in 2012, and things aren't getting any better. Gross bookings tumbled 38% last year, and it has yet to bottom out. Bookings slumped 30% in the latest quarter. Its larger rival went public two months ago, shedding new light on Zynga's weakness.

Kandi seems to be doing things right. Unlike the stagnant Coca-Cola and the fading Zynga, the Chinese maker of electric vehicles is on a tear. Revenue soared 176% in the latest quarter, fueled by the success of Kandi's auto-sharing platform in Hangzhou. Why are so many people shorting a stock that's growing so fast? A fair explanation is that it was toiling away in obscurity a year ago, relying largely on go carts and ATVs before shifting its focus to passenger vehicles. Success has drawn attention from bulls and bears, but it's a risky short given its heady growth.

Comcast may also seem like an unusual short. After watching its video customers cut the cord for years, it's coming off back-to-back quarters of sequential gains. However, the spike in shorts can be partly attributed to hedging activity given the sector consolidation that's taking place as Comcast tries to grow its cable empire.

Finally, Capstone Turbine has more skeptics than it has generally faced over the past year. The maker of co-generation turbines that run on many different fuel types has proven vulnerable to its shorts this month -- the stock has surrendered 27% of its value so far in May. The slide started after a dilutive secondary offering, and things got worse when the prospectus for the offering revealed weaker than expected fiscal results for the March quarter. Capstone Tubrine's low stock price makes it volatile, but that's not scaring away the shorts, who hope they don't get thrown off this mechanical bull.

Don't lose your head
Investors on the long side of these five stocks don't need to panic. Many of these stocks have been able to climb the proverbial wall of worry despite having large short positions. If anything, bullish developments could trigger short squeezes, which would drive the prices here as skeptics cover their negative wagers. However, it's still important to keep in mind that a lot of people think these stocks are going down. Bulls and bears can't both be right.

3 Heavily Shorted Stocks That Are Poised to Be Multibaggers
The one sure way to get wealthy is to invest in a groundbreaking company that goes on to dominate a multibillion-dollar industry. Our analysts have found multi-bagger stocks time and again. And now they think they've done it again with three stock picks that they believe could generate the same type of phenomenal returns. They've revealed these picks in a new free report that you can download instantly by clicking here now.


Read/Post Comments (0) | Recommend This Article (2)

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.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2956980, ~/Articles/ArticleHandler.aspx, 10/24/2014 2:11:51 PM

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...

Today's Market

updated Moments ago Sponsored by:
DOW 16,763.64 85.74 0.51%
S&P 500 1,959.40 8.58 0.44%
NASD 4,470.95 18.16 0.41%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

10/24/2014 1:56 PM
CMCSA $54.05 Up +0.83 +1.55%
Comcast Corp CAPS Rating: ***
CPST $0.88 Up +0.01 +1.26%
Capstone Turbine C… CAPS Rating: ***
KNDI $14.06 Up +0.42 +3.09%
Kandi Technologies CAPS Rating: *
KO $40.99 Up +0.13 +0.33%
Coca-Cola CAPS Rating: ****
ZNGA $2.38 Up +0.01 +0.42%
ZYNGA INC CAPS Rating: *

Advertisement