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, we'll look at companies on the American Stock Exchange with the largest number of shares sold short as a percentage of a company's float. Combining that with the collective intelligence of Motley Fool CAPS, we'll see which of these companies Fools believe have the power to make short work of short-sellers.
|
Company |
Shares Short-Nov 14 |
Shares Short-Oct 31 |
% Change |
% Float |
|
|---|---|---|---|---|---|
|
Orleans Homebuilders |
1.58 |
1.91 |
(17.2%) |
32.6% |
* |
|
GreenHunter Energy |
0.49 |
0.49 |
(0.4%) |
21.7% |
*** |
|
Ener1 |
6.49 |
6.56 |
(1%) |
20.5% |
* |
|
Interoil |
5.05 |
5.27 |
(4.2%) |
20.4% |
* |
|
American Apparel |
6.06 |
6.42 |
(5.6%) |
20.3% |
** |
|
Cheniere Energy |
9.30 |
10.90 |
(14.7%) |
19.7% |
** |
|
Grey Wolf |
27.61 |
26.66 |
3.6% |
15.9% |
***** |
|
Apex Silver Mines |
7.33 |
8.19 |
(10.6%) |
15.4% |
*** |
|
Seabridge Gold |
4.18 |
4.18 |
0.1% |
12.2% |
*** |
|
Inverness Medical Innovations |
8.79 |
8.53 |
3.1% |
12% |
*** |
Sources: wsj.com. Share counts in millions.
Of course, this isn't a list of stocks to buy -- or short! These stocks could have serious problems that warranted short interest, but they might also be stricken by short-term troubles. Only Foolish due diligence will tell you for certain; our 120,000-strong CAPS community offers an excellent place to start.
The short list
The potential for gas and oil discoveries in Papua New Guinea has been keeping Interoil afloat for a while, although investors remain unconvinced. Even among CAPS members, more than half are doubtful that it can outperform the market -- along with the vast majority of All-Stars. The discovery of oil-bearing sands off the coast of Ghana, by an Interoil joint venture with four other partners, may change some minds.
Still, CAPS player temisvarska figures the market is only looking at one aspect of the company's business in its overly bearish stance on Interoil: "Current levels only price in IOC's refinery, while IOC's upstream business will be worth four to five times the price if and when there is a commitment to build an LNG plant in Port Moresby. Even if IOC's LNG plant venture doesn't get off the ground, the gas they have found will not be stranded."
Cheniere Energy has the opposite situation; nearly three-quarters of the CAPS members rating the company think it will beat the market. Yet 60% of the All-Star members rating it disagree. PlanToWin thinks Cheniere simply has too much debt to survive: "Too much debt and no prospects of digging themsselves out once their projects go live. The debtholders will ultimately own this company."
dexion10, meanwhile, thinks that an oversupply of natural gas will ultimately hurt Cheniere's prospects: "It costs about 5.50 to import LNG to the U.S. but we can drill for nat gas for $3.50 and we have an over-supply of it in the ground..... this thing is toast."
Yet with hedge fund manager Paulson & Co. taking a near 15% stake in the natural gas producer, CAPS member greenbodhi thinks Cheniere will benefit from a short-term short squeeze: "Paulson's investment makes for a shortsqueeze that will take some time to cover. Although the company is [lousy], the stock price will hold its value through the end of this year at least."
Don't sell yourself short
It pays to start your own research on these stocks on Motley Fool CAPS. Read a company's financial reports, scrutinize key data and charts, and examine the comments your fellow investors have made all from a stock's CAPS page. Then 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!
