Since everyone loves a winner, it's reasonable to assume that everyone hates a loser -- everyone but short-sellers, that is. These contrarian investors bet that hot stocks are primed to fall, aiming to turn their pessimism into potential profits.
This week, let's look at companies on the New York Stock Exchange with the largest decline in the number of shares short. Combining that with the collective intelligence of Motley Fool CAPS, we'll see which of these firms Fools believe have the power to make short work of short-sellers.
|
Company |
Shares Short-Apr 15 |
Shares Short-Mar 31 |
% Change |
Float+ |
30-Day Return |
CAPS Rating (out of 5) |
|---|---|---|---|---|---|---|
|
Toronto-Dominion Bank |
5.2 |
20.5 |
(74.38%) |
714.8 |
3.91% |
**** |
|
Motorola |
38.9 |
50.9 |
(23.68%) |
2250 |
(5.23%) |
** |
|
Chesapeake
Energy |
34.1 |
44.8 |
(23.96%) |
463.5 |
11.76% |
***** |
|
Boston
Scientific |
37.8 |
46.3 |
(18.35%) |
1310 |
(2.85%) |
*** |
|
Citigroup |
120.2 |
127.8 |
(5.92%) |
5210 |
9.99% |
** |
|
Pfizer |
55.7 |
62.6 |
(10.93%) |
6710 |
(3.56%) |
*** |
|
KKR Financial |
5.1 |
11.7 |
(56.41%) |
106.8 |
(2.77%) |
** |
|
MeadWestvaco |
9.6 |
15.8 |
(39.31%) |
163.7 |
(1.30%) |
** |
|
Alcoa |
14.7 |
20.2 |
(27.11%) |
807.9 |
(2.49%) |
*** |
|
Coca-Cola |
17.9 |
23.0 |
(22.29%) |
2200 |
(1.89%) |
**** |
Of course, this isn't a list of stocks to buy -- or short! These stocks could have serious problems that warrant their short interest, but they might also be stricken by short-term troubles. Only Foolish due diligence will tell you for certain; our 99,000-strong CAPS community just offers a good place to start. Yet investors seem divided in their opinion of these companies, as only three have garnered four stars or better on their CAPS ratings.
Rigging it up
Like Patterson-UTI last week, we shouldn't be surprised that Chesapeake Energy has not only one of the greatest percentage declines of shares short, but the company has also enjoyed the biggest share price increase over the past month. According to the industry analysts at the Perryman Group, the Barnett Shale formation in Texas where Chesapeake operates is one of the largest onshore natural gas fields in the country, with known reserves of 2 trillion cubic feet of gas, and an estimated 30 trillion cubic feet of total natural gas resources. With natural gas prices rising all over, we ought to see strong performance from this energy company.
Certainly, some investors think so. CAPS player ari21 says Chesapeake has positioned itself to be ahead of the game precisely when natural gas demand will surge.
There is an increase in gas demand. It is related to Oil prices. This company has invested billions in technology and infractructure to [increase] production. ... Demand for gas will be high just when this company is increasing production. Bigger [revenues], bigger earnings.
Similarly, Plutoniumhead lays out the demographic picture confronting Chesapeake before endorsing the view that, having made the investments in itself already, it stands to reap the windfall that will come.
Energy hungry nations like South Korea and Japan compete in a global natural gas market that hardly existed five years ago. ... The distribution process has changed; natural gas is now converted into a liquid (LNG ... liquified natural gas takes up about 1/600th the volume of natural gas) and shipped around the globe. There is a wide difference in the price per million BTUs around the world and energy hungry countries are willing to pay a premium for this commodity. ... For example, recently while natural gas was selling for approximately $9.50 per million BTUs in the US, it sold for $14.00 per million BTUs in Japan.
Speak up
You've heard from the CAPS community. Now it's your turn to have your say. Share your views with the CAPS community: Squeeze 'em till it hurts, or short 'em till the sun don't shine? May the best argument prevail!
