Since everyone loves a winner, it's reasonable to assume that everyone hates a loser -- everyone but short sellers, at least. 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 Nasdaq exchange with the biggest 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, Feb. 15 |
Shares Short, Jan. 31 |
% Change |
Float* |
1-Month Return |
CAPS Rating (out of 5) |
|---|---|---|---|---|---|---|
|
Altera |
9.2 |
15.1 |
(39.29%) |
303.2 |
(1.03%) |
*** |
|
SiRF Technology |
9.9 |
16.0 |
(38.16%) |
55.7 |
(18.28%) |
**** |
|
Healthcare Services |
5.0 |
7.9 |
(36.54%) |
40.6 |
(8.56%) |
**** |
|
Applied Materials |
30.7 |
37.6 |
(18.47%) |
1370 |
15.56% |
**** |
|
Hudson City Bancorp |
24.0 |
29.2 |
(17.71%) |
464.6 |
(3.26%) |
*** |
|
Comcast Communications |
21.0 |
24.9 |
(15.71%) |
2840 |
12.50% |
** |
|
Medarex |
24.7 |
28.4 |
(12.96%) |
126.7 |
(7.06%) |
** |
|
Popular |
23.5 |
26.6 |
(11.67%) |
263.9 |
(20.60%) |
*** |
|
Marvell Technology |
32.9 |
36.5 |
(10.02%) |
477.7 |
8.99% |
**** |
|
Charter Communications |
93.5 |
99.4 |
(5.97%) |
362.2 |
(19.83%) |
** |
*Float is the number of shares available for trading.
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 85,000-strong CAPS community just offers a good place to start. Yet most of these companies are generally well-liked -- they've garnered three stars or better on their CAPS ratings.
Feeling the squeeze
The semiconductor business is certainly a fickle one, or perhaps sensitive to many market forces that make it both cyclical and volatile. Branching out beyond the confines of typical semiconductor fare might be a way to ameliorate the manic ways of the market, and Applied Materials is doing just that sort of thing. With the report that it has inked the largest order in its history -- a $1.9 billion deal for solar panels -- investors might see the short sellers run even farther away than they already were.
It was that deal that had CAPS investors believing the worst is over, and they're now calling the chip manufacturer an alternative-energy company. While details are still sketchy -- the company might reveal more in its May release of quarterly results -- CAPS players like inblaze think Applied Material will be uniquely positioned to capitalize on the demand for alternative energy. In this pitch from a few days ago, inblaze writes, "Applied is uniquely positioned to deliver gigawatt-scale manufacturing capability. Today, Applied Materials filed a Form 8-K with the U.S. Securities and Exchange Commission announcing sales agreements totaling approximately $1.9 billion for a gigawatt-scale solar project."
Or as renegade49 put it on the same day, "[Applied Materials] is to the solar energy industry what Levy Strauss was to the gold rush."
Of course, Applied Materials bears are not completely convinced, at least not for the short term. As nwtracker points out, there is still a large lag time before this deal comes to fruition:
The solar market has less commitment than plain retail does. These guys wont even get to market for 2 more quarters. This means that they are relying on mem chips to survive. It's gonna be tough for three quarters at least.
While solar's future remains subject to debate, it may no longer be debatable that Applied Materials can make short work of the short sellers for the time being.
Speak up
You've heard from CAPS investors -- 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!
