Many people like to follow what the "big money" Institutional/Hedge Funds investors are buying, selling and shorting. So I began searching for some U.S. traded stocks of Chinese companies that fit into this category.
I searched for companies that had significant decreases of short interest over the last month or so, with some even longer than that. Short interest is an indicator of what short seller's think about a particular stock. If short interest increases, then shorts are betting that the price of the stock will be going down. However, if short interest decreases, then shorts are betting that the price of the stock will be going up.
Many investors use short interest to make predictions about the direction of a particular stock and to measure the bullishness or bearishness of it. Below is a table of the short interest decreases of Dangdang (DANG), Renren (RENN), Youku Tudo (YOKU) and Sina Corporation (SINA).
*Data sourced from Nasdaq.com and Yahoo Finance.
As you can see, short interest has been declining in these stocks. So why are shorts covering their positions? Let's take a closer look to find out why.
China GDP Going Up
Last year China's economy in 2012 "slowed" to a staggering 7.8 percent, down substantially from 9.3% growth in 2011. Because of this, shorts piled into Chinese stocks for the most part of the year. However, China's economic growth accelerated in the fourth quarter of 2012 and exceeding analysts forecasts. This helped confirm that a rebound for the world's second-largest economy was taking place.
Then China's forecasts for the 2013 year topped expectations with growth likely to be above 8% for the year. This was great news for all Chinese stocks because it meant the economy was back on track. This helps explain why shorts have trimmed down their positions. Now let's take a look at where these companies stand as of now.
E-Commerce China Dangdang Inc.
Operates as a business-to-consumer e-commerce company in the People's Republic of China. Dangdang has a market cap of $327.04 million with its recent closing price of $4.08. Dangdang's cash per share is $2.85 and its book value stands at $1.73.
Dangdang's short interest has been steadily decreasing ever since the end of May 2012. On May 31, 2012, Dangdang had short interest of over 9.5 million shares. As of January 15th 2013, Dangdang's short interest has almost been cut in half to only 4.9 million shares.
During last quarter's earnings report Dangdang topped analyst estimates on both the top and bottom lines. Lets not forget that they forecasted higher guidance as well for the upcoming quarter. Not great news for shorts!
Operates a social networking Internet platform in China. The company's platform enables its users to connect and communicate with each other, share information and play online games through its user platform. Renren has a market cap of 1.20 billion with its recent closing price of $3.20. Renren's cash per share is $2.37 and its book value stands at $2.92.
Renn's short interest has been steadily decreasing ever since the end of October 2012. On October 31, 2012, Renn had short interest of 10.6 million shares. As of January 15th 2013, Renn's short interest has been cut in half to 4.7 million shares. Renn also announced that it will continue its buyback program in which it will buyback a total of $150 million worth of American Depositary Shares ("ADS").
Youku Tudo Inc.
Operates as an Internet television company in the People's Republic of China. Its Internet television platform enables consumers to search, view, and share video content across various devices. Youku Tudo has a market cap of 3.57 billion with its recent closing price of $21.84. Youku's cash per share is $3.68 and its book value stands at $9.22.
Short shares of Youku have been decreasing since the beginning of December 2012. On December 15, 2012, Youku had short interest of 12.1 million shares. As of January 15, 2013, Youku's short interest has declined by three million to 9.1 million shares.
It helps as well that Yoku has had some analyst upgrades with Deutsche Bank upgrading the stock to a buy with a $29.56 price target.
Provides online media and mobile value-added services (MVAS) in the People's Republic of China. It provides advertising, non-advertising, and free services through SINA.com, Weibo.com, and SINA Mobile. Sina has a market cap of 3.54 billion with its recent closing price of $53.23. Youku's cash per share is $10.47 and its book value stands at $16.97.
Short shares of Sina have also been decreasing since the beginning of December 2012. On December 15, 2012, Sina had short interest of 5.4 million shares. As of January 15, 2013, Sina's short interest has declined two million to 3.3 million shares sold short.
Investors are always reminded that before making any investment, you should do your own proper diligence on any stock mentioned in this article. Any material in this article should be considered general information, and not relied on as a formal investment recommendation. I hope this article was helpful to you and I look forward to all of your comments and insight.