Everyone loves a winner. It's reasonable to assume, then, that everyone hates a loser. Yet with investing, that's not always the case.
Contrarian investors love to pick through stocks that others have cast away. Value investors are the garbage-divers of the marketplace. Conversely, when stocks have a big run-up, some investors like to bet against them. They're called short sellers, and they bet that a stock is primed for a fall.
What goes up must come down
Here's a list of stocks on the Nasdaq exchange that reported having some of the largest short interest positions in May. We'll turn to the collective intelligence of the Motley Fool CAPS community to learn which of these stocks -- if any -- Foolish investors think have the power to make short work of short sellers.
|
Company |
Shares Short, May |
Shares Short, April |
Percent Change |
CAPS Rating (out of 5) |
|---|---|---|---|---|
|
Comcast (NASDAQ:CMCSA) |
117.6 |
73.0 |
61.10% |
*** |
|
Level 3 Communications (NASDAQ:LVLT) |
109.4 |
108.4 |
0.92% |
**** |
|
Microsoft (NASDAQ:MSFT) |
98.8 |
98.8 |
0.00% |
** |
|
Sirius Satellite (NASDAQ:SIRI) |
91.3 |
120.4 |
(24.17%) |
* |
|
Charter Communications (NASDAQ:CHTR) |
91.1 |
87.2 |
4.47% |
** |
Of course, this isn't a list of stocks to buy -- or short! Maybe these stocks have some serious problems that warrant the high short interest. Maybe not. What do you think? Will they be squeezed?
Tapping the CAPS advantage
Over on CAPS, more than 30,000 rated investors are looking over these same stocks. Some they like, some they don't, and they all vote on how they feel about them. Sometimes, though, the stocks CAPS players like cross swords with those that short sellers don't.
Most of the names here are familiar to us from the last time we looked at the list, meaning that short sellers continue to dislike the prospects of these companies. While it looks like the short sellers have relented in their attack on Sirius, since the number of shares short declined dramatically, they seem to have turned their attention to Comcast instead -- there was a 61% increase in the amount of its stock being sold short.
There's been some speculation that perhaps the cable TV service provider may be going private, particularly as the Dolan family tries to remove Cablevision (NYSE:CVC) from the public markets. Yet as Foolish contributor Dave Smith calculated, a $102 billion debt load for the effort might not make a whole lot of economic sense. Short sellers might be banking on nothing happening and the stock falling as a result.
One out of every five professional and novice investors who have weighed in on the cable company are considered All-Stars: CAPS players who have consistently outperformed their peers. Almost all of them are bullish on Comcast, with that sentiment being consistently maintained since the beginning of the year. We can tell that by its CAPS trend. Here's what a few CAPS players had to say:
- daiglels thinks Comcast can continue to dominate the industry. "Industry consolidation will result in Comcast growing. Other cable companies are no longer the competition. AT&T, Verizon (NYSE:VZ) and others are. Comcast is poised to compete long term and succeed."
- PsiPhi1 agrees, noting that Comcast's cable, phone, and Internet service will be a big growth opportunity. "Triple play is a huge revenue driver. The increased capital spending is a symptom of huge market for this. The head-start over most LECs will continue to be a factor over the next few years."
- That's a view echoed by industry analyst and research firm Netscribes. "The advent of the new technology has enabled telecom companies to provide triple-play services, high-speed Internet, video on demand and telephone services over a single broadband connection. With wireless and broadband services being projected as the key growth drivers for the U.S. telecom services industry, Comcast expects increasing digital video penetration through 2008. Going forward, increase in subscribers base, though marginal, and a gradual hike in its average revenue per unit (ARPU) envisages positive operating environment for the company."
Of course, not everyone is so upbeat. Comcast bear Velobici isn't so sure that Verizon's fiber-optic service won't be a category killer. "Comcast relies upon COAX based cable for its life. Verizon will compete with fiber optic cable (FiOS), cherry-picking the best markets that Comcast has, leaving Comcast with its most expensive (least profitable) customers only. Comcast is not ready for competition or adaptable to meet it. Comcast faces a long slow painful decline in the face of a superior competitor."
Speak up!
You've heard from the CAPS community; now it's your time for a star turn -- tell the community what you have to say. Only on Motley Fool CAPS does your opinion count just as much as the short sellers'. Tell us what you think: Squeeze 'em till it hurts, or short 'em till the sun don't shine? May the best argument prevail!
Microsoft is a recommendation of Motley Fool Inside Value. A 30-day free trial is your shortcut to market-beating returns. Click here to start yours today.
Fool contributor Rich Duprey does not have a financial position in any of the stocks mentioned in this article. You can see his holdings here. There's no shortcut around The Motley Fool's disclosure policy.
