Top 10 Most Shorted Shipping Stocks

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 |  Includes: ALEX, BALT, DRYS, EGLE, EXM, FRO, GNK, ISHC, SFL, SSW
by: Neoclassical Economist

The shipping industry has been hit hard in 2011. Shipping rates are down and the Baltic Dry Index (BDI) has once again crossed below the 2000 mark – currently at 1,912, down 2.7% today. We actually did see some glimmer of hope during the first two weeks of October. BDI was going up, and Genco Shipping’s stock price gained 21% while DryShips’ price went up by 10.6%. But why was there such a difference in performance between these two stocks? Often times, the answer simply is: short interest. Investors should expect a lot more volatility from the shippers that are at the top of the list below.

Let’s look at the 10 most shorted shipping stocks, based on the number of shares currently held short divided by total shares outstanding, along with the estimated number of days to cover:

Company

Ticker

Short Interest

% of Shares

Day to Cover

(in mil. of shares)

Outstanding

1. Frontline Ltd

FRO

12.2

15.7%

10

2. Genco Shipping

GNK

5.6

15.6%

7.8

3. Eagle Bulk Shipping

EGLE

6.9

11.1%

9.4

4. Baltic Trading

BALT

1.3

7.7%

10.2

5. Excel Maritime

EXM

5.1

6.0%

8.1

6. Ship Finance Intl.

SFL

3.9

4.9%

8.5

7. Intl. Shipholding Co.

ISH

0.3

4.2%

12.7

8. DryShips Inc.

DRYS

14.6

4.0%

1.8

9. Alexander & Baldwin Inc.

ALEX

1.3

3.1%

8.2

10. Seaspan Corp.

SSW

1.4

2.0%

5.4

Click to enlarge

Source

The days to cover statistic is defined as the number of shares sold short divided by average daily volume. As a reminder, short interest may be useful in judging investor sentiment for a particular stock from month to month, and as a comparison with other shorted stocks. This indicator is useful for both bears and bulls – bulls may consider a high short interest ratio a positive, since eventually there would be upward pressure on the stock’s price as short sellers cover their short positions. This upward pressure can become very strong if, for instance, a company announces some positive news and forces a number of short sellers to cover at the same time.

Short Interest Trends: The most noteworthy change in short interest in the past two weeks is that Frontline Ltd.’s number of shares held short increased by almost 700,000 to 12.2 million. Eagle Bulk’s short interest also increased by 2.9%.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.