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After a dismal year in 2011, the shipping industry is left pondering what to expect in 2012. The Baltic Dry Index is continuing its downward slide – currently at 1,738, with a 50-day moving average of 1,883. Shipping stock prices are down dramatically not without the helping hand of short sellers. Let’s look at the 10 most shorted shipping stocks currently, based on the number of shares currently held short divided by total shares outstanding, along with the estimated number of days to cover. Investors should expect a lot more volatility from the shippers that are at the top of the list below.

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. The days to cover statistic is defined as the number of shares sold short divided by average daily volume.

Company

Ticker

Short Interest (millions of shares)

% of Shares Outstanding

Days to Cover

1. Frontline Ltd

FRO

11.8

15.2%

4.1

2. Genco Shipping

GNK

4.6

12.8%

10.4

3. Eagle Bulk Shipping

EGLE

6.8

10.9%

12.2

4. Ship Finance Intl

SFL

5.1

6.4%

5.3

5. Baltic Trading

BALT

1

5.9%

14.4

6. Excel Maritime

EXM

4.9

5.8%

16

7. International Shipholding Co.

ISH

0.3

4.2%

11.6

8. DryShips Inc.

DRYS

12.8

3.0%

3

9. Alexander & Baldwin Inc.

ALEX

1.5

3.6%

3.3

10. Seaspan Corp.

SSW

1.8

2.6%

2.5

Source: Nasdaq.

As a comparison, see the November 2011 short ratios for shippers. We can see that short ratios are starting to decrease slightly. For instance, Genco Shipping’s short interest stood at 15.6% in November, almost three percentage points higher than today. There has been plenty of talk that many shippers are trading near or below liquidation value. As such, we could see more short sellers abandon the industry in search for greener pastures, especially if BDI finally starts moving up.

Source: Update: 10 Most Shorted Shipping Stocks