There's still no shortage of negative wagers out there.
Folks are still betting against the bulls by taking short positions -- which essentially means selling shares they don't own and buying them back later to zero out their positions.
In order to dig a little deeper into the bearish mind-set, I figured I would take a closer look at five of the companies with the largest short positions when the month began.
|
Stock |
12/31/10 |
12/15/10 |
|---|---|---|
| Citigroup (NYSE: C) | 354.6 million | 357.1 million |
| Sirius XM Radio (Nasdaq: SIRI) | 213.1 million | 225.7 million |
| Ford (NYSE: F) | 179.5 million | 201.5 million |
| Level 3 (Nasdaq: LVLT) | 131.9 million | 147.4 million |
| Sprint Nextel (NYSE: S) | 129.5 million | 132.9 million |
Source: Barron's.
Before breaking into an interesting trend, let's go over what each of these five investments cover.
- Citigroup is the banking giant parent of Citibank.
- Sirius XM is the satellite radio monopoly with 20 million subscribers.
- Ford is the stateside automaker that didn't file for bankruptcy reorganization.
- Level 3 provides Internet and network services.
- Sprint Nextel is the wireless carrier heavyweight formed by the merger of Sprint and Nextel.
The first thing you may notice is that the shares sold short for all five of these stocks actually declined between the middle of December and year's end.
The second thing you may notice is that all but Ford are trading at single-digit prices. The lower prices attract speculators, naturally. However, it also means that the sheer number of shares sold short isn't representative of the actual value of these pessimistic bets. Put another way, Bank of America (NYSE: BAC) would clock in sixth on this list with more than 111.6 million shares sold short. Multiply the short positions by the share price, though, and it has a bigger short dollar figure than all but Ford.
Investors should still continue to monitor the shorting data, which comes out semi-monthly. Spot the trends. Gauge sentiment. One should also realize that a large short position isn't necessarily a bad thing. If a positive catalyst alters the investing landscape, shorts scrambling to cover their positions can create a dramatic bullish rally called a short squeeze.
Shorts can move the market, and not always in the direction they would like.
Are you long or short any of these stocks? Share your thoughts in the comment box below.
