For this short article, I have listed 3 stocks with high short interest. I give a brief summary and analysis, then my opinion whether to buy or sell.
OCZ Technology (OCZ) Current pps: $9.00
OCZ is one of the leaders in the design, manufacturing, and distribution of high performance and reliable Solid State Drives (SSDs) and premium computer components, such as RAM modules.
|% Held by Insiders:||8.24%|
|% Held by Institutions:||74.30%|
|Shares Short (as of Jan 13, 2012):||22.24M|
|Short % of Float (as of Jan 13, 2012):||45.90%|
|Short % of Float (as of Feb 9, 2012):||47.33%|
OCZ just recently completed a common stock offering of 12,000,000 primary shares at a price of $9.00 per share. The underwriters have a 30-day option to purchase up to an additional 1,800,000 shares of common stock to cover over-allotments of shares, if any. OCZ will receive roughly $101 million in net proceeds from the offering.
If the underwriters exercise their over-allotment option, then OCZ will receive almost $116 million.
Short interest has increased month over month, in part because of this recent stock offering, as shorts consider this stock dilution Also, this time of year, the entire PC chip and drive sector companies tend to slow down. However, OCZ falls under the cyclical stock category, and economic growth has picked up a bit lately.
The chart above is showing a nice triangle wedge mid term trend pattern and The MACD remains bullish. The short term indicators seem to suggest a pull back to $8.25.
Will many of the shorts cover in fear of being squeezed, or will they continue to hold their shorts? The 52 week high is $10.94, and the stock is trading closer to this level lately. My opinion is that OCZ is a good short term short candidate, then a swing trade to over $10, possibly even a new 52 week high within 6 weeks.
Metabolix Incorporated (MBLX) Current pps: $2.94
The company develops and commercializes technologies for the production of polymers and chemicals in plants and in microbes.
|Avg Vol (3 month):||509,873|
|Avg Vol (10 day):||368,350|
|% Held by Insiders:||22.60%|
|% Held by Institutions:||56.80%|
|Shares Short (as of Jan 13, 2012):||7.06M|
|Short % of Float (as of Jan 13, 2012):||32.50%|
|Short % of Float (as of Feb 9, 2012):||29.68%|
|Shares Short (prior month):||7.27M|
Grain processor Archer Daniels Midland Co. (NYSE:ADM) said it will end a commercial alliance with Metabolix next month. Archer has been suffering lately as a company, with their latest earnings missing the target due to a maze of charges and items. Oilseeds profitability was down significantly (margin of 3.4% versus 5.3%) on weak crush margins.
The above chart certainly reflects the end of the Metabolix relationship with ADM. The stock took a major beating in Mid January as we can clearly see. The MACD went way below the zero line, just brutal! However, the MACD signal is beginning to curve back up. The chart shows a small engulfing pattern, indicating a continued upward move.
This trade may very well be good for a move back to at least $4 a share, as I expect the heavy short interest to lighten up quite a bit as the stock slowly rebounds. I consider Metabolix a good short to mid term buy. I would caution that The Metabolix long term channel trend has been a down trend. I do not consider Metabolix a good long term buy and hold at this time.
Transcept Pharma (TSPT) Current pps: $8.15
Transcept Pharma is a specialty pharmaceutical company focusing on the development and commercialization of proprietary products that address therapeutic needs in the field of neuroscience.
|Avg Vol (3 month):||337,065|
|Avg Vol (10 day):||96,313|
|% Held by Insiders:||41.58%|
|% Held by Institutions:||27.80%|
|Shares Short (as of Jan 13, 2012):||2.14M|
|Short % of Float (as of Jan 13, 2012):||27.50%|
|Short % of Float (as of Feb 9, 2012):||28.63%|
|Shares Short (prior month):||2.10M|
This is just the kind of stock that is foolish to short. The float is very small coming in at a little over 6.5 million shares. Intermezzo, Transcept's new drug for insomnia, could be a very big commercial success.
In Nov 2011, The FDA approved Intermezzo, making it the first approved treatment for patients afflicted by middle-of-the-night waking followed by difficulty returning to sleep. Transcept's marketing partner Purdue Pharmaceuticals will launch the product in mid-2012.
This stock rates on my list as a 10 out of 10 in terms of a possible massive short squeeze. Because of the low float, a double from the current stock is price is more than possible. Transcept is a strong buy in my opinion.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
Disclaimer: This article is intended for informational and entertainment use only and should not be construed as professional investment advice. Always do you own complete due diligence before buying and selling any stock.