All-Mighty Short-Sellers: Not Really All-Powerful?

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 |  Includes: ADS, AMED, ARE, DLR, GMCR, MAC, PNRA, RJF, SLG, SYNA
by: Markham Lee

From the Economist, here is a look at the stocks with the highest levels of short interest:

(From the Economist): "WHAT do a coffee company, a financial planner and a shopping-mall operator have in common? All are among the ten listed firms most in the sights of short-sellers, who borrow shares in the hopes of making a profit when their price falls. While there is little doubt that many short-sellers have profited handsomely on the recent misery of financial-services firms, the current list of short-sellers’ darlings—compiled by Data Explorers, a short-selling research firm—suggests that their recent track record has not been as good. As short interest in Nasdaq-listed Green Mountain Coffee Roasters more than doubled over the past three months, with around a third of the firm's shares now on loan, its share price rose by almost 30%. That is not the aroma of freshly-brewed coffee you smell; it’s burnt fingers."

Graphic courtesy of the Economist.com

So much for the all powerful short-sellers, based on the assertions of some folks short-sellers have the ability to "take down" the shares of a company at will. In the end it comes down to the overall health of a company, the optimist will win if the company is in good shape and the pessimists will win if the company is on the brink of disaster. Perhaps instead of blaming short-sellers people should look at management instead.

Sources:

The Economist: "Betting on a fall" -- March 26, 2009.

Disclosure: at the time of publishing the author didn't own a position in any of the companies mentioned in this article; the ideas expressed are solely the opinions of the author and shouldn't be viewed as financial or investment advice.