Contrarian investors love to pick through stocks others have cast aside. Value investors are the garbage divers of the marketplace. But 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 are five stocks on the Nasdaq that saw some of the largest increases in their short interest positions in four weeks. We'll turn to the collective intelligence of the Motley Fool CAPS community to learn which, if any, of these stocks Foolish investors think have the power to continue making short work of short sellers.
|
Company |
Shares Short, Oct. |
Shares Short, Sept. |
% Change |
Shares Out |
Oct. Total Out |
CAPS Rating (Out of 5) |
|---|---|---|---|---|---|---|
|
Level 3 Comm. (NASDAQ:LVLT) |
139.0 |
129.0 |
7.75% |
1,530.00 |
9.08% |
*** |
|
Yahoo! (NASDAQ:YHOO) |
58.1 |
51.8 |
12.16% |
1,340.00 |
4.34% |
** |
|
BEA Systems (NASDAQ:BEAS) |
25.6 |
21.6 |
18.52% |
393.42 |
6.51% |
*** |
|
E-Trade Financial (NASDAQ:ETFC) |
25.3 |
21.7 |
16.59% |
423.65 |
5.97% |
*** |
|
Charter Comm. (NASDAQ:CHTR) |
94.0 |
91.0 |
3.30% |
400.45 |
23.47% |
** |
Of course, this is not a list of stocks to buy -- or short! Maybe these stocks still have 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 72,000 investors are looking over these stocks. Some they like, some they don't, and they vote on what they think about them. And sometimes the stocks CAPS players like cross swords with the ones short sellers don't like.
Some companies on the list are familiar from weeks past when their short interest levels shot up, and it's easy to see how some show up again and again. Charter, for example, with almost one quarter of its share shorted, is tiptoeing -- or stampeding, some would say -- toward bankruptcy. When even Comcast (NASDAQ:CMCSA) experiences troubles -- it has appeared on this list a time or two -- can Charter hope to survive?
More interesting is the new appearance of BEA Systems. Although the chart shows BEA with the largest increase in shares short of all the companies highlighted, that tells only half the story. Those numbers represent just the first two weeks of October. If we go back and look over the full four weeks from Sept. 14 to Oct. 15, the increase is all the more dramatic: They've nearly doubled from 13.1 million shares short!
But CAPS investors have remained upbeat, with 90% of them casting votes for the stock to outperform the market. Even for the month of October, investors newly rating the stock have marked it to outperform by almost a 5-to-1 margin.
One of those is CAPS player dmeredit, who thinks most of the reasons given for the stock's decline have little merit.
This has been beaten down for a number of reasons - potential for stock / insider trading irregularities, delayed filings, soft enterprise market etc. However, I feel this may be the low point, and as the CTO of a tech firm, I still see a lot of strong products and value proposition coming from BEA, so feel this has some appreciation in it over the next 12 months.
That's about how All-Star BLAYNE100 feels. Looking at what BEA has to offer, he thinks the future is looking up, possibly including a buyout.
Software industry is hot right now. Activist shareholder wants sale. Beas products are good. Beas is coming back from recent lows this summer.
Speak up
You've heard from the CAPS All-Stars. Now it's your time for a star turn. Tell the CAPS community what you have to say. On Motley Fool CAPS, your opinion counts 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!
