Since everyone usually loves a winner, it's reasonable to assume that everyone also hates a loser. Yet with investing, that's not always the case.
Contrarian investors are the market's garbage-divers, thrilled to pick through stocks that others have cast away. Conversely, when stocks have a big run-up, some investors like to bet against them. These brave souls are called short sellers, and they bet that a stock is primed for a fall.
What goes up must come down
Here's a list of stocks on the New York Stock Exchange with some of the largest reported short interest positions in June. We'll turn to the collective intelligence of the Motley Fool CAPS community to learn which of these stocks -- if any -- Foolish investors think has the power to make short work of short sellers.
|
Company |
Shares Short-June |
Shares Short-May |
% Change |
CAPS Rating (out of 5) |
|---|---|---|---|---|
|
Ford |
214.1 |
208.8 |
2.54% |
* |
|
Motorola |
139.3 |
125.7 |
10.82% |
** |
|
Time Warner |
79.3 |
86.7 |
-8.54% |
*** |
|
Qwest |
78.9 |
79.7 |
-1.00% |
** |
|
Advanced Micro Devices |
73.8 |
73.3 |
0.68% |
** |
Of course, this isn't a list of stocks to buy -- or short! These stocks may or may not have serious problems that justify their short interest. What do you think -- will they be squeezed?
Tapping the CAPS advantage
Over on CAPS, more than 60,000 investors are looking over these same stocks, and voting their opinions on the long-term potential of each. Sometimes, the stocks CAPS players like cross swords with those that short sellers don't.
Most of the names here aren't new to the list, meaning that short sellers haven't found many new targets. But it looks like the CAPS community isn't so high on the stocks either. Only Time Warner rates as high as a mediocre three stars, while Ford is the bane of the market with its one-star rating.
CAPS investors are pretty evenly divided over Ford (53% outperform vs. 47% underperform), however, and the CAPS All-Stars -- investors who consistently outperform their peers -- tilt in favor of underperformance. They've felt this way for a while now, as we can tell from the stock's CAPS trend. Here's what a few CAPS players had to say:
MindFreak sees Ford an underachiever:
Weakest of the automotives. They are years behind even GM. Could see a rise if Union negotiations go well, but even then they have leveraged a ton of assets at a time that they are in trouble. They run the risk of complete disintegration.
More than one investor sees a Ford car as simply uninspired. For example, HeatVision says "Don't buy a Ford unless you're a mechanic," while leohaas bemoans its advertising:
'Have you driven a Ford lately' is the current slogan for this company. Translation: 'Yeah, we know we have been producing poor quality cars over the past decades, but we really have improved.' I nominate this slogan for the worst advertising pitch of the last five years. Quality is only one of the problems Ford is facing. In addition, its cost structure is out of whack due to its union contracts and pension obligations.
It looks like Ford may deserve its low rating, but does that mean it warrants the top short position?
Speak up!
You've heard from the CAPS community; now it's your time for a star turn. Tell the community what you have to say. Only on Motley Fool CAPS does your opinion count just as much as the short sellers'. Squeeze 'em till it hurts, or short 'em till the sun don't shine? May the best argument prevail!
Time Warner is a recommendation of Motley Fool Stock Advisor. A 30-day free trial is your shortcut to market-beating returns. Click here to see which companies have already been selected to profit handsomely in your portfolio.
Fool contributor Rich Duprey owns shares of Ford but does not have a financial position in any of the other stocks mentioned in this article. You can see his holdings here. There's no shortcut around The Motley Fool's disclosure policy.
