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Summary

  • Daniel Yu is a crusading short seller who has earned the name "the Dark Knight."
  • Following his lead, we looked for overvalued stocks that are due for a correction.
  • We screened for stocks that have seen a spike in short selling in the last three months.

The somewhat iconoclastic short seller who fashions himself after the Dark Night (no, really) has struck again; this time focused on the now-insolvent Spanish wireless carrier Let's Gowex SA (OTC: GOW).

Like Bruce Wayne, Daniel Yu has an epic and stirring backstory. After getting burned on some mortgage investments tied up in Freddie Mac (OTCQB:FMCC) during the financial crisis, Yu set out to address what he saw as a surplus of cheerleading in the financial industry.

By bringing scrutiny to weaker companies, Yu hopes to save investors from being gamed by a lack of information. And his firm (which has a secret identity) has been getting braver, especially after a successful short sale on Quindell, a British technology firm.

If there's one place it takes even more courage to get into short-selling market than the U.S., it's Britain, where the libel laws give firms a lot of power to sue their naysayers and win.

The caped cru-trader, coupled with the large valuations that are currently keeping equity prices from advancing, inspired us to look at what the short sellers have been doing. It's been a long couple of years for them; will 2014 finally be the year where they get their payday?

We built a list using stocks with a high valuation ratio, with a price equity ratio (P/E) above 50. We then narrowed that list by screening for stocks that had experienced a spike in short selling over the most recent quarter.

Click here for the full, interactive chart.

Short selling is a type of speculative trade where the investor makes money if the stock price goes down. You borrow shares of company from a broker, sell them, and then buy them back at a lower price. The difference in price between the first and second sale is your profit.

Click here to see the full, interactive chart.

1. Cray Inc. (NASDAQ:CRAY): Engages in the design, development, manufacture, marketing, and service of high-performance computing [HPC] systems, known as supercomputers. Market cap at $1.2B, most recent closing price at $29.39.

Shares shorted have increased from 4.51M to 5.08M over the last month, an increase which represents about 1.55% of the company's float of 36.75M shares.

Days to cover ratio at 12 days.

2. Qihoo 360 Technology Co. Ltd (NYSE:QIHU): Provides internet and mobile security products in the People's Republic of China. Market cap at $11.83B, most recent closing price at $93.95.

Shares shorted have increased from 5.48M to 7.05M over the last month, an increase which represents about 2.02% of the company's float of 77.68M shares.

Days to cover ratio at 2.95 days.

3. Cardtronics Inc. (NASDAQ:CATM): Operates automated teller machines [ATMs] and financial services kiosks. Market cap at $1.53B, most recent closing price at $34.39.

Shares shorted have increased from 2.51M to 3.89M over the last month, an increase which represents about 3.15% of the company's float of 43.84M shares.

Days to cover ratio at 8.49 days.

4. PCTEL, Inc. (NASDAQ:PCTI): Provides propagation and optimization solutions for the wireless industry. Market cap at $153.32M, most recent closing price at $8.23.

Shares shorted have increased from 500.47K to 724.11K over the last month, an increase which represents about 1.29% of the company's float of 17.40M shares.

Days to cover ratio at 4.36 days.

Click here for the full, interactive chart.

5. Acxiom Corporation (NASDAQ:ACXM): Provides marketing technology and services that enable marketers to manage audience, personalize consumer experiences, and create customer relationships. Market cap at $1.67B, most recent closing price at $21.68.

Shares shorted have increased from 3.03M to 4.14M over the last month, an increase which represents about 1.54% of the company's float of 72.11M shares.

Days to cover ratio at 5.44 days.

6. SIRIUS XM Radio Inc. (NASDAQ:SIRI): Provides satellite radio services in the United States and Canada. Market cap at $20.88B, most recent closing price at $3.46.

Shares shorted have increased from 197.06M to 307.85M over the last month, an increase which represents about 3.9% of the company's float of 2.84B shares.

Days to cover ratio at 5.59 days.

7. Cavium, Inc. (NASDAQ:CAVM): Designs, develops, and markets semiconductor processors for intelligent and secure networks. Market cap at $2.64B, most recent closing price at $49.89.

Shares shorted have increased from 2.90M to 3.81M over the last month, an increase which represents about 1.77% of the company's float of 51.39M shares.

Days to cover ratio at 4.28 days.

8. Molina Healthcare Inc. (NYSE:MOH): Provides Medicaid-related solutions to meet the health care needs of low-income families and individuals, as well as assists state agencies in their administration of the Medicaid program. Market cap at $2.17B, most recent closing price at $46.97.

Shares shorted have increased from 5.44M to 6.27M over the last month, an increase which represents about 2.75% of the company's float of 30.18M shares.

Days to cover ratio at 9.45 days.

Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Business relationship disclosure: Kapitall is a team of analysts. This article was written by James Dennin, one of our writers. We did not receive compensation for this article (other than from Seeking Alpha), and we have no business relationship with any company whose stock is mentioned in this article.

Source: Are The Short Sellers Right About These 8 Stocks?