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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.

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