We Fools are a buy-to-hold bunch. We believe that jumping in and out of stocks on a short-term basis makes just about as much sense as moving from one house to another every few months. Being an investor is about owning a piece of a living, breathing, dynamic company -- not just a stock.
So why would it be important to tell you about stocks that might make big moves over the short term? Because we are all human, and seeing our investments swing wildly, either up or down, can cause us to do some pretty silly things with our money. If you're a shareholder in one of the three companies mentioned here, prepare yourself mentally for big swings to come.
Each of these three companies are heavily shorted -- they have investors betting against their near-term success -- and they are reporting earnings this week. The combination of those two factors is a recipe for outsized moves in each company's shares. Here's why these companies find themselves in this position:
|
Company |
% of Shares Short |
When |
Expected Revenue (Millions) |
Expected EPS |
|---|---|---|---|---|
|
Molycorp (NYSE: MCP) |
33% |
Wednesday |
$146 |
($0.29) |
|
Linn Energy (LINE +0.00%) |
12% |
Thursday |
$627 |
$0.27 |
|
SandRidge (NYSE: SD) |
16% |
Friday |
$453 |
$0.00 |
Sources: Finviz.com, E*Trade.
Molycorp is a rare-earths mining company with its primary operations in California. Over the past year, shareholders in the company have endured a pretty choppy ride, with the stock now resting about 40% lower than it was last January.
Over the past decade, China has been the dominant player in providing the world's supply of the 17 core rare-earth metals. Molycorp is trying to get in on the action, but the company has yet to reach full capacity at its California mine. Even more troubling, commodity prices have taken a steep dive since 2010, when China announced that it will cut back on production.
With such low prices on the very minerals that are supposed to enrich Molycorp shareholders, it's not tough to figure out why one-third of the company's shares are sold short.
Source: LINN Energy.
Shareholders in Linn Energy endured a precipitous fall in the company's stock last June, when it was announced that the SEC was investigating the company for questionable accounting practices. Since then, the share price has recovered somewhat, but doubters in the company still abound.
A lot of investors believe that the company is sitting on huge untapped resources in Texas' Permian Basin. The problem is, those resources are untapped, and there's no way to know for sure what's in the ground at this point. That, combined with the fact that some question Linn's ability to make wise acquisitions, is what's motivating short-sellers right now.
Source: SandRidge Energy/
Finally, we have SandRidge Energy, an Oklahoma-based oil and gas company. The organization experienced some disappointment over the past year, when it paid up to acquire land in the Gulf of Mexico, only to divest that purchase when it determined there wasn't enough available in the region to continue drilling.
In its place, SandRidge is now focusing intensely on its operations in the mid-continent: Mississippi, Kansas, Oklahoma, and North Dakota. Many believe this is where the real organic growth can come from for the company.
But two variables, which are somewhat out of the company's control, are worth keeping tabs on. The first is the underlying price of the commodities SandRidge is selling: gas and oil. The second is how well the company did in predicting is validated reserves.
