In "Why I Bought Eastman Kodak," I noted the high amount of short interest in Eastman Kodak (EK) as one of four reasons to buy Kodak's stock. I neglected to post a chart showing the change in short interest. Interestingly, since hitting a peak of 81.4M shares on August 15, 2011, short interest has steadily declined in EK.
The chart below shows that shorts first retreated as EK soared over 50%. Shorts rushed back in as EK subsequently lost 2/3 of its value on the way to a fresh all-time low amidst the last bankruptcy scare. Even as the stock declined the last two months, shorts have also steadily stepped away. Instead of trying to hang on until EK goes to zero, it seems instead the process of locking in profits is already underway for shorts in EK's stock. (Short interest was about 25% of float as of December 15, 2011).
Until this week, shorts have been able to cover into a worsening backdrop for the stock. Assuming that short interest will soon drop to 40M or so where it started 2011 and news does not get any worse for EK over this time, the stock could get the rocket fuel it needs to hurdle $1/share soon.
click to enlarge
Shorts are steadily stepping away from Eastman Kodak.
Be careful out there!
Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in EK over the next 72 hours.