Pre-Paid Legal Services: A Short Squeeze Waiting to Happen

| About: Pre-Paid Legal (PPD)

Do your own research prior to making any investment decisions. I and/or people I know are involved in the names discussed in this article.

This is going to be short and sweet because the opportunity is a simple one. What we have here is a company with 24% of their float short, a 30d average volume equal to approximately 3% of the total short position, and a very bullish trend. We're talkin' short squeezin' time baby.

Pre-Paid Legal Services (NYSE:PPD) is a short squeeze waiting to happen, in my opinion. The company has a float of ~8.1m shares with 1.95m short. This means that 24% of the float is short. The 30d average volume is approximately 61,000 shares. In order for the shorts to completely cover their positions it would take nearly 31 days++++ per the following calculation:

(1,950,000 shares short) / (61,000 shares/day 30d average) = 31.9 days

What this means is that if the shorts decided to cover and were the entire buying presence every single day, using the 30d average as their max unloadable position, it would take them 31+ days to buy back their borrowed shares.

Let's be realistic. PPD has gone parabolic and there's a significant short position out there getting absolutely hurt right now. The pain has to be unbearable as day-by-day the name creeps higher and higher. Odds are there will be a point where capitulation sets in and there's a short squeeze which, given the number of shares short compared to average daily volume, is going to pop this thing to a very satisfactory return for the bulls.

Disclosure: Long PPD