Seeking Alpha
Value, growth, long-term horizon, medium-term horizon
Profile| Send Message|
( followers)  

We've started using ShortScreen, an interesting app available in the SeekingAlpha App Store. The app uses the Altman Z-Score model to try and predict bankruptcy up to two years before it occurs. According to ShortScreen.com, the model has been proven to be 72% accurate.

Yes, the model has many limitations, but it does present a good starting point if you're looking for short ideas.

To refine the list, we also screened based on the ratings developed by forensic accounting firm Audit Integrity. The firm was founded in 2002 to develop risk management tools based on a statistical analysis of corporate integrity. The Accounting and Governance Risk (AGR) rating is a forensic measure of the transparency and reliability of a corporation’s financial reporting and governance practices.

All the companies in this list have low AGR scores, i.e. more aggressive accounting practices than most other firms. 100 is the perfect score, all of the stocks below have AGR ratings below 40.

Here is the output: a list of highly distressed firms with aggressive accounting practices. (Click to enlarge)

The lower the AGR score, the more risky the firm's accounting practices, according to Audit Integrity. The smaller (more negative) the distance from the distress threshold (the Z-score), the more distressed the company is, according to ShortScreen.

The list has been sorted by the AGR score.

1. Time Warner Inc. (NYSE:TWX): Entertainment Industry. Market cap of $34,873B. Altman Z-score at -2.7688, and AGR score at 8. Short float currently at 1.09%, which implies a short ratio of 1.83 days. The stock has gained 12.03% over the last year.

2. Cadiz Inc. (NASDAQ:CDZI): Business Services Industry. Market cap of $137M. Altman Z-score at -16.6718, and AGR score at 8. Short float currently at 4.36%, which implies a short ratio of 13.21 days. The stock has lost -16.33% over the last year.

3. Sequenom Inc. (NASDAQ:SQNM): Biotechnology Industry. Market cap of $467M. Altman Z-score at -8.2343, and AGR score at 11. Short float currently at 26.07%, which implies a short ratio of 8.05 days. The stock has gained 6.69% over the last year.

4. Safeguard Scientifics, Inc. (NYSE:SFE): Diversified Investments Industry. Market cap of $247M. Altman Z-score at -1.8456, and AGR score at 13. Short float currently at 3.82%, which implies a short ratio of 8.98 days. The stock has gained 7.11% over the last year.

5. VeriSign Inc. (NASDAQ:VRSN): Application Software Industry. Market cap of $5,337B. Altman Z-score at -21.5774, and AGR score at 14. Short float currently at 8.21%, which implies a short ratio of 3.21 days. The stock has gained 44.24% over the last year.

6. Toreador Resources Corp. (TRGL): Independent Oil & Gas Industry. Market cap of $202M. Altman Z-score at -3.4541, and AGR score at 14. Short float currently at 4.74%, which implies a short ratio of 3.57 days. The stock has gained 21.75% over the last year.

7. CIENA Corp. (NYSE:CIEN): Communication Equipment Industry. Market cap of $1,296B. Altman Z-score at -2.8765, and AGR score at 18. Short float currently at 24.71%, which implies a short ratio of 4.84 days. The stock has lost -6.07% over the last year.

8. GATX Corp. (NYSE:GMT): Rental & Leasing Services Industry. Market cap of $1,337B. Altman Z-score at -2.4748, and AGR score at 22. Short float currently at 11.63%, which implies a short ratio of 15 days. The stock has gained 4.6% over the last year.

9. Arena Pharmaceuticals, Inc. (NASDAQ:ARNA): Drug Manufacturer. Market cap of $810M. Altman Z-score at -3.2496, and AGR score at 27. Short float currently at 28.15%, which implies a short ratio of 3.19 days. The stock has gained 44.49% over the last year.

10. S1 Corporation (NASDAQ:SONE): Internet Software & Services Industry. Market cap of $271M. Altman Z-score at -10.828, and AGR score at 27. Short float currently at 3.31%, which implies a short ratio of 5 days. The stock has lost -21.75% over the last year.

11. Wabash National Corp. (NYSE:WNC): Trucks & Other Vehicles Industry. Market cap of $389M. Altman Z-score at -2.2901, and AGR score at 30. Short float currently at 10.11%, which implies a short ratio of 4.3 days. The stock has gained 211.32% over the last year.

12. Incyte Corporation (NASDAQ:INCY): Biotechnology Industry. Market cap of $1,674B. Altman Z-score at -4.33, and AGR score at 30. Short float currently at 13.55%, which implies a short ratio of 10.64 days. The stock has gained 96.28% over the last year.

13. Jazz Pharmaceuticals, Inc. (NASDAQ:JAZZ): Biotechnology Industry. Market cap of $381M. Altman Z-score at -3.4238, and AGR score at 37. Short float currently at 6.42%, which implies a short ratio of 2.44 days. The stock has lost -5.4% over the last year.

14. NPS Pharmaceuticals, Inc. (NASDAQ:NPSP): Biotechnology Industry. Market cap of $377M. Altman Z-score at -4.3741, and AGR score at 39. Short float currently at 4.13%, which implies a short ratio of 8.15 days. The stock has gained 43.5% over the last year.

Disclosure: No positions

Source: 14 Short Ideas for Next Week