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Recently a UBS report listed 15 stocks that have the highest short interest. The report is based on the concentration of UBS’s clients, as of December 7th, 2011. Investors may short these stocks for various reasons and it doesn’t mean that these stocks are expected to underperform the market.

The 15 stocks are listed as below:

Stock

Ticker

Sector

YTD

Verizon

VZ

Technology

14%

IBM

IBM

Technology

35%

Johnson & Johnson

JNJ

Healthcare

8%

Goldman Sachs

GS

Financial

-39%

Intel Corp

INTC

Technology

23%

Amazon

AMZN

Services

6%

Chesapeake Energy

CHK

Basic Materials

-4%

Salesforce.com

CRM

Technology

-6%

Chipotle Mexican Grill

CMG

Services

55%

Lululemon Athletica

LULU

Consumer Goods

37%

Lennar Corporation

LEN

Industrial Goods

6%

Express Scripts Inc.

ESRX

Healthcare

15%

United States Steel Corp

X

Basic Materials

-53%

Green Mountain Coffee Roasters

GMCR

Consumer Goods

78%

First Solar

FSLR

Technology

-65%


Several companies with negative returns in this list are either facing short term operational problems or suffering from the macro economy. However, some of these names gained more than 20% year to date return –including IBM (NYSE:IBM), Intel Corp (NASDAQ:INTC), Chipotle Mexican Grill (NYSE:CMG), Lululemon Athletica (NASDAQ:LULU), and Green Mountain Coffee Roasters (NASDAQ:GMCR).

Although IBM took the second place in the UBS list, we have a different opinion. IBM has returned 35% year to date. Its forward P/E is 14.55 and its EPS is expected to grow at 10.68%. IBM has a very low beta of 0.41, indicating a much lower risk level compared with the market. According to Insider Monkey’s hedge fund tracking list, thirty five hedge funds invested in IBM in the third quarter, and less than half of them (thirteen hedge funds) reduced their positions. Moreover, Warren Buffett disclosed a new position with more than 57 million shares in IBM last month. Ken Fisher’s Fisher Asset Management is also bullish about IBM since it owned 2.20 million shares position at the end of the third quarter.

CMG is also a hedge fund-loved stock, although it’s facing problems with its food costs. CMG has a 55% YTD return, a 0.71 beta, a 49.72 forward P/E, and a 19.91% expected EPS growth rate. CMG was in twenty six hedge funds’ portfolio at the end of September. Seven hedge funds initiated new positions in CMG while thirteen hedge funds boosted their positions. Jim Simons took the largest portion. His Renaissance Technologies increased its position by 33% and had 8.11 million shares in CMG. Philippe Laffont’s Coatue Management largely boosted its position by more than 9 times and revealed 4.55 million shares by the end of September.

LULU is also a growth stock with a 42.19 forward P/E and 27.8% EPS growth rate. LULU has gained 37% year to date, and was owned by 22 hedge funds as of September 30th. Some of the hedge fund managers largely boosted their positions. David E. Shaw’s D. E. Shaw increased its position by 183% and had 6.5 million shares in LULU. Jeffrey Vinik’s Vinik Asset Management increased its position by more than 8 times and reported 13.12 million shares.

Intel is holding up much better than other tech giants such as Microsoft (NASDAQ:MSFT) and Hewlett-Packard (NYSE:HPQ). The stock is trading at a forward P/E of 10.21, and its EPS is expected to grow at 10.17% in the next five years. Although 42 hedge funds retained INTC in their portfolios in the third quarter, most of them cut their positions. Moreover, twenty hedge funds sold out their entire positions in INTC during the third quarter, including Paul Ruddock and Steve Heinz’s Lansdowne Partners, which was INTC’s largest hedge fund stakeholder in the second quarter, with more than 23 million shares in the stock. George Soros’ Soros Fund Management, Martin Whitman’s Third Avenue Management, Ray Dalio’s Bridgewater Associates, Glenn Russell Dubin’s Highbridge Capital Management, and David E. Shaw’s D. E. Shaw are among the hedge funds that sold out INTC before October.

It is interesting to see solid dividend stocks like Verizon (NYSE:VZ) and Johnson & Johnson (NYSE:JNJ) in this list. We understand why investors are short high PE stocks like GMCR, LULU, CRM, CMG and AMZN. The short interest as a percentage of float is around 1.5% in Verizon and Johnson & Johnson, whereas the short interest is around 25% of float in GMCR and 45% in First Solar. This tells us that investors really aren’t bearish about VZ and JNJ

Disclosure: I am long MSFT, CHK.

Source: 15 Stocks That UBS Clients Are Shorting Right Now - Should You Join Them?