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 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 New York Stock Exchange that saw some of the largest increases in their short interest positions last month. 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 continue making short work of short sellers.
|
Company |
Shares Short-Oct. |
Shares Short-Sept. |
% Change |
Total Shares Out |
Total Shares Out, Oct. |
CAPS Rating (out of 5) |
|---|---|---|---|---|---|---|
|
Washington Mutual |
59.2 |
46.7 |
26.77% |
862.80 |
6.86% |
* |
|
EMC |
64.0 |
52.8 |
21.21% |
2100.00 |
3.05% |
***** |
|
Target |
33.8 |
28.1 |
20.28% |
846.60 |
3.99% |
**** |
|
Pulte Homes |
31.4 |
26.0 |
20.77% |
252.30 |
12.45% |
* |
|
Beazer Homes |
36.0 |
30.8 |
16.88% |
39.20 |
91.84% |
* |
Of course, this isn't a list of stocks to buy -- or short! Maybe these stocks still have some serious problems that warrant the once-high short interest. Maybe not. What do you think? Will they be squeezed?
Tapping the CAPS advantage
Over on CAPS, more than 70,000 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.
While some of the names on the list are probably not surprising, such as homebuilders Pulte and Beazer, others might raise an eyebrow. Target, for example, seems to have shorts betting against a strong holiday shopping season. But with all the recalls plaguing toymakers, and consumers allegedly feeling the pinch, perhaps big-box retailers like Target will start seeing drops in sales.
While the percentage of shares short for Beazer is amazing, there's good reason for it. The homebuilder defaulted on its loan covenants and had to go hat-in-hand for forbearance until May. It's also the subject of various probes into its mortgage lending practices. The shorts are expecting things to keep getting worse for Beazer.
While some leaders have soured on EMC, CAPS investors maintain a five-star rating on the data storage specialist, which has seen a 21% rise in its short position. The IPO of VMWare
Top-rated All-Star BimcyFinance, with a 94.89 player rating, thinks the combination of organic growth and participation in VMWare's success will be potent:
With its underlying stock ownership alone...this stock has serious potential mainly because of its ownership. EMC owns a large chunk of VMware, with others including Intel and Cisco
(NASDAQ:CSCO) . Not to mention EMC itself has a fast growing profitable business that you're essentially purchasing at these levels for $15B. EMC will continue to be a strong performer for some time to come.
CAPS player ElvisHolmes thinks EMC has not been standing still. While everyone is still talking about VMWare, it went out and got the next big thing, too:
EMC has just bought the next rocket stock to IPO like they have with VM Ware. This company, Voyence, is used to maintain SOX and PCI compliance which are both federal requirements for large networks like the Chicago Stock Exchange.
Speak up
You've heard from the CAPS All-Stars. Now it's your turn to star. Tell the CAPS community what you have to say. On Motley Fool CAPS, your opinion counts 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!
