There's never a shortage of naysayers.
Speculators feeling that individual securities are heading lower take short positions -- which essentially mean selling shares they don't own and buying them back later to zero out their positions.
I tend to look at the list of the stocks with the largest short positions from time to time, hoping to see where investors are directing their venom. The list naturally gravitates to stocks with heavy trading volume and companies where the shares have low share prices, but the heavily shorted names jockey for position along the way.
Let's take a look at how the five stocks with the largest number of shares sold short as of the end of last month.
Feb. 29, 2012
Feb. 15, 2012
Sirius XM Radio
||285.8 million||273.1 million|
||217.1 million||215.7 million|
||173.9 million||165.7 million|
Bank of America
||152.0 million||154.4 million|
||135.0 million||144.9 million|
These names should be very familiar to you.
- Sirius XM Radio is the country's only satellite radio service. The company is coming off another profitable quarter last month, kicking off the year with 21.9 million subscribers.
- Nokia moves up a slot since the start of the year when it had just 147.9 million shares sold short. Investors just aren't feeling confident about the Finnish company's chances of regaining handset market share as it gets lost in the smartphone migration.
- Frontier is the only name that wasn't on this list when the year began. The provider of phone, Internet, and television services slashed its quarterly dividend last month.
- Bank of America has slipped from second to fourth on this list during the course of the year. There is still healthy distrust in one of the "too big to fail" banking giants, but an improving economy is helping.
- Ford is the stateside automaker that didn't get bailed out. Despite recent strength in car sales and moves to beef up its underfunded pension obligations, there are still plenty of bears looking for Ford to shift into reverse.
Hate is such a strong word
Just because a stock is heavily shorted doesn't mean that it's going down. In fact, many bulls often see this as a good thing. A whiff of good news can send these stocks rallying through a short squeeze with bears rushing to close out their positions and pushing the shares higher along the way.
If you're still in the mood to go short, check out a new report detailing a pair of "too small to fail" stocks that the government won't let collapse. It's a free report, but it won't be around forever. Check it out now.
The Motley Fool owns shares of Bank of America and Ford Motor. Motley Fool newsletter services have recommended buying shares of Nokia and Ford Motor. Motley Fool newsletter services have recommended creating a synthetic long position in Ford Motor. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
Longtime Fool contributor Rick Munarriz calls them as he sees them. He does not own shares in any of the stocks in this story, except for Ford. Rick is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early.