Because 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 and aim to turn their pessimism into potential profits.
This week, let's look at companies on the New York Stock Exchange with the largest decrease in the number of shares short. Combining that with the collective intelligence of Motley Fool CAPS, we'll see which of these companies Fools believe have the power to continue to make short work of short-sellers.
|
Company |
Shares Short-June 13 |
Shares Short-May 30 |
% Change |
Float* |
% of Float |
CAPS Rating (Out of 5) |
|---|---|---|---|---|---|---|
|
Wells Fargo (NYSE:WFC) |
140.8 |
153.1 |
(8.02%) |
3,296.8 |
4.27% |
*** |
|
Centerpoint Energy |
13.1 |
24.2 |
(45.87%) |
326.4 |
4.01% |
**** |
|
Ingersoll-Rand |
10.0 |
20.6 |
(51.28%) |
271.8 |
3.71% |
***** |
|
EMC (NYSE:EMC) |
67.1 |
73.0 |
(8.12%) |
2,065.3 |
3.25% |
***** |
|
Qwest Communications (NYSE:Q) |
102.5 |
108.1 |
(5.17%) |
1,742.2 |
5.88% |
** |
|
Bank of America (NYSE:BAC) |
11.6 |
15.8 |
(26.76%) |
4,416.8 |
0.26% |
** |
|
Standard Pacific (NYSE:SPF) |
37.0 |
40.9 |
(9.44%) |
71.0 |
52.17% |
* |
|
Dynegy (NYSE:DYN) |
31.4 |
35.1 |
(10.60%) |
497.1 |
6.31% |
**** |
|
Mylan (NYSE:MYL) |
72.8 |
76.4 |
(4.79%) |
301.4 |
24.15% |
**** |
|
SLM |
29.2 |
32.9 |
(11.14%) |
462.2 |
6.32% |
** |
Sources: wsj.com. Share counts in millions.
*Shares outstanding, minus shares controlled by insiders, restricted stock, and shares held by 5% owners.
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 110,000-strong CAPS community just offers a good place to start. Yet investors seem to like most of these companies, because most have CAPS ratings of three stars or better.
Backs against the wall?
Because Countrywide Financial was the largest mortgage lender, there didn't seem to be any real reason Bank of America wouldn't win approval of its acquisition to bail it out. But investigations into Countrywide's lending practices, the level of risky loans in Countrywide's portfolios, and mini-scandals about alleged favors for high-ranking government officials have weighed on Bank of America's share price. Add to that the concerns about what further deterioration in the housing industry could do to Bank of America's profits.
SammyG77, one of the top-rated CAPS investors, thinks the market has already priced the risks associated with the Countrywide deal into Bank of America's stock and that the Motley Fool Income Investor recommendation is attractively priced: "May not be the bottom, but [it's] a very good value play ... with a very nice dividend. The Countrywide [acquisition] is making a lot of scared money but I believe the market has already priced this risk in 2 or 3 times."
Store it all
The ratings agencies are enamored with EMC's consistent profitability, diversified product line, smart acquisitions, and strong finances, so they're likely to slightly upgrade the storage maker's credit rating. Now that EMC has entered the consumer market with the acquisition of one-time market star Iomega, it's positioned to capitalize on the fast-growing home front.
CAPS player dooderino likes the many irons EMC has in the fire and says there are still a number of options it could take that would further boost its performance.
Storage market is growing steadily. Significant international sales translate well into a shrinking $US. RSA Security a leader in a growing market. Making good bets on cutting edge technologies like solid-state drives, cloud computing. Investment in [VMware] a drag at the moment (as VMW is a good company but overpriced). If EMC chooses to sell more VMW shares, or spin off completely (unlikely), it would be a boost.
Calling home
As more consumers switch to mobile phones or cable services, Qwest Communications is now forecasting that revenue will likely come in slightly lower than they did last year. Customer losses, a difficult economy, and more robust competition have been pulling the plug on Qwest's ability to boost profits.
Investor chapman32 said in May that steady improvement will come from an otherwise well-run company and pointed out that investors have the dividend to enjoy in the meantime.
They manage a steady, increasing cash flow very well. ... [F]antastic CEO. Take the dividend yield for a nice short-term return, but bet on the steady, successful long-term plan, including what has been a well-received broadband service to make Qwest a real winner.
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!
