A bullish market doesn't mean that all bears go into hibernation.
Short sellers were loading up on their pessimistic wagers even as the market was barreling toward its best quarterly rally in nearly three years.
Short interest rose 2% on the New York Stock Exchange from the end of February to mid-March. The number of stocks sold short climbed 2.5% in that time on the tech-heavy Nasdaq.
Speculators feeling that individual securities are heading lower take short positions, which essentially means selling shares they don't own and buying them back later to zero out their positions. Let's take a closer look at some of the stocks with unusually large increases in short positions.
Feb. 29, 2012
March 15, 2012
Sirius XM Radio
||285.8 million||307.8 million|
||25.1 million||29.2 million|
||19.0 million||21.7 million|
Green Mountain Coffee Roasters
||21.2 million||25.1 million|
||217.1 million||238.6 million|
These names should be very familiar to you.
- An increase in Sirius XM Radio shorting is intriguing since it happened during the same time frame that ownership restrictions were relaxed for its preferred stake investor that may -- or may not -- decide to increase its stake in the satellite radio company.
- Who cares if World of Warcraft gamers are bolting? Activision Blizzard has fresh installments in its Diablo and Call of Duty franchises rolling out later this year.
- Kudos to the Groupon shorts, piling on ahead of Monday's 17% tumble resulting from accounting problems at the daily deals leader.
- Green Mountain shorts grew in number as fears increased of renewed competition for the Keurig company. I wonder if that trend reversed when it made nice with Starbucks later in March.
- Finally, we have Nokia taking a hit despite the potential promise of the Lumia 900 handset that hits the market this weekend.
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 and has written calls on Activision Blizzard. Motley Fool newsletter services have recommended buying shares of Activision Blizzard, Nokia, and Green Mountain Coffee Roasters. Motley Fool newsletter services have recommended creating a lurking gator position in Green Mountain Coffee Roasters and a synthetic long position in Activision Blizzard. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.
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 Green Mountain. Rick is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early.