4 Short Sellers Favorites
06/10/2014 7:00 am EST
Robbie Citrino of Kapitall.com highlights four stocks that have seen increasing levels of short interest for potential contrarian picks.
Short selling is the process by which investors are allowed to make bearish bets—that is, bets based on the belief that the market or a particular security will go down. It's not unlike taking out a loan, except instead of borrowing money you borrow equity.
You then sell the equity and buy it back later at a cheaper price, pocketing the difference.
Float short, or shorted interest, is the percentage of shares not held within the company that have been shorted by investors. Having a large percentage of shares shorted usually indicates that investors believe the stock is riskier than most and that many are betting on its downfall. We decided to look for some blockbuster names with a large amounts of short interst.
Startup 3D Systems (DDD) gained fame in late 2013 after jumping 100% in a little over two months. The company quickly revealed that it could not keep up with the Street's ambitious revenue projections and investors reacted sharply, halving its market cap in a matter of weeks. Still wary, investors are shorting 34% of the float even though the stock is trading near its 52-week lows.
After cutting Lululemon Athletica's (LULU) share price in half over the past year in a steady decline, investors remain bearish as 33% of the clothing company's shares are currently being shorted. The poor sentiment around Lululemon stems mainly from the ex-CEO's tasteless comments and eventual ousting, in addition to product recalls and disappointing same store sales growth.
Blackberry Ltd. (BBRY), known mainly for the downfall of its Blackberry mobile phone, is in talks to separate and sell the more valuable parts of the near-bankrupt company. Therefore it is no wonder that almost 32% of its float remains shorted.
Finally, investor darling Tesla Motors (TSLA), which has seen impressive growth in the past couple of years, still makes shareholders nervous after its 400% increase from two years ago as 26.5% of its shares are being shorted by the market.
With investors banking on a nosedive can these stocks work their way back into shareholders' hearts?
1. Tesla Motors, Inc. (TSLA): Designs, develops, manufactures, and sells electric vehicles and advanced electric vehicle powertrain components. Market cap at $25.55B, most recent closing price at $204.94. Shares shorted: 26%.
2. 3D Systems Corp. (DDD): Engages in the design, development, manufacture, marketing, and servicing of 3D printers and related products, print materials, and services. Market cap at $5.15B, most recent closing price at $50.42. Shares shorted: 34%.
3. Lululemon Athletica Inc. (LULU): Engages in the design, manufacture, and distribution of athletic apparel and accessories for women, men, and female youth primarily in Canada, the United States, and Australia. Market cap at $6.27B, most recent closing price at $43.27. Shares shorted: 33%
4. BlackBerry Limited (BBRY): Provides wireless communications solutions worldwide. Market cap at $4.02B, most recent closing price at $7.48.Shares shorted: 32%
By Robbie Citrino of Kapitall.com