In some of my prior articles, I have mentioned various stocks with high short interest, but did not cover insider buy/sell activity. In this write up, I will list five stocks with very large short interest, with insider selling and/or insiders refraining from buying. These combined factors can offer an important gauge for investors to consider joining in the short interest, buy, or just staying away.
Barnes & Noble (BKS) operates as a content, commerce, and technology company in the United States. It provides access to books, magazines, newspapers, and other content through its multi-channel distribution platform.
2/15/12 pps: $13.72
| Share Statistics | |
| Avg Vol (3 month): | 1,708,690 |
| Avg Vol (10 day): | 1,230,980 |
| Shares Outstanding: | 58.06M |
| Float: | 25.42M |
| % Held by Insiders: | 50.38% |
| % Held by Institutions: | 43.40% |
| Shares Short (as of Jan 31, 2012): | 17.11M |
| Short Ratio (as of Jan 31, 2012): | 7.30 |
| Short % of Float (as of Jan 31, 2012): | 60.30% |
| Shares Short (prior month): | 17.61M |
Barnes & Noble has over 60% of the float held short, which comes out to a massive amount of 17.11 million shares. Investors are really betting against the future success of the company.
Barnes & Noble just announced that it won't sell any books from Amazon's publishing arm, Amazon Publishing, because the company feels "squeezed" by Amazon's recent move; wanting digital exclusivity from its authors, so only Amazon can sell said authors' e-books. As Amazon is becoming a greater force in the massive online book market, Barnes & Noble becomes lesser. This seems to explain a lot of the short interest in the stock.
Insider Transactions Reported
| Date | Insider | Shares | Type | FTransaction | Value* |
|---|---|---|---|---|---|
| Feb 2, 2012 | LYNCH WILLIAMOfficer | 9,115 | Direct | Disposition (Non Open Market) at $12.08 per share. | 110,109 |
| Nov 5, 2011 | LINDSTROM ALLEN WOfficer | 1,359 | Direct | Disposition (Non Open Market) at $11.61 per share. | 15,777 |
| Oct 31, 2011 | GOLDEN DAVID GDirector | 8,149 | Direct | Acquisition (Non Open Market) at $0 per share. | N/A |
| Oct 31, 2011 | CARLETON MARK DDirector | 8,149 | Direct | Acquisition (Non Open Market) at $0 per share. | N/A |
| Oct 31, 2011 | WILSON DAVID ADirector | 8,149 | Direct | Acquisition (Non Open Market) at $0 per share. | N/A |
| Oct 31, 2011 | CAMPBELL GEORGE JRDirector | 8,149 | Direct | Acquisition (Non Open Market) at $0 per share. | N/A |
| Oct 31, 2011 | HIGGINS PATRICIADirector | 8,149 | Direct | Acquisition (Non Open Market) at $0 per share. | N/A |
| Oct 31, 2011 | DILLARD II WILLIAMDirector | 8,149 | Direct | Acquisition (Non Open Market) at $0 per share. | N/A |
| Oct 31, 2011 | MAFFEI GREGORY BDirector | 8,149 | Direct | Acquisition (Non Open Market) at $0 per share. | N/A |
| Oct 31, 2011 | MILLER IRENE RDirector | 8,149 | Direct | Acquisition (Non Open Market) at $0 per share. | N/A |
| Oct 1, 2011 | TROIA CHRISTOPHEROfficer | 3,036 | Direct | Disposition (Non Open Market) at $11.83 per share. | 35,915 |
| Oct 1, 2011 | BOTTINI MARKOfficer | 2,717 | Direct | Disposition (Non Open Market) at $11.83 per share. | 32,142 |
| Oct 1, 2011 | LOMBARDI JOSEPHOfficer | 6,309 | Direct | Disposition (Non Open Market) at $11.83 per share. | 74,635 |
| Oct 1, 2011 | DEFELICE EUGENE VOfficer | 4,528 | Direct | Disposition (Non Open Market) at $11.83 per share. | 53,566 |
| Oct 1, 2011 | DEASON DAVID SOfficer | 1,984 | Direct | Disposition (Non Open Market) at $11.83 per share. | 23,470 |
Every acquisition has been through stock option grants with a par value of $0.00. There have been no direct acquisitions reported since Oct. 2011. It is more than obvious that insiders are not feeling good about the company's' prospects this year.
I highly doubt there will be significant positive news to cause a potential short squeeze here. I agree with the heavy short interest in the stock, and if I were an insider, I would not touch the stock either!
KB Home (KBH) operates as a home building and financial services company in the United States. The company constructs and sells various types of homes, including attached and detached single-family residential homes, town homes, and condominiums primarily for first-time, move-up, and active adult home buyers.
2/15/12 pps: $12.39
| Share Statistics | |
| Avg Vol (3 month): | 6,046,990 |
| Avg Vol (10 day): | 7,970,140 |
| Shares Outstanding: | 77.09M |
| Float: | 65.38M |
| % Held by Insiders: | 15.16% |
| % Held by Institutions: | 108.30% |
| Shares Short (as of Jan 31, 2012): | 28.01M |
| Short Ratio (as of Jan 31, 2012): | 4.10 |
| Short % of Float (as of Jan 31, 2012): | 52.10% |
| Shares Short (prior month): | 26.97M |
KBH has over 50% of its float held short. Being a home building company, it is understandable why so many would be short here. The entire housing market has been depressed for what now seems like an eternity. However, things do appear to be getting a little better lately, as U.S. home builders' sentiment rose in February to the highest level in nearly five years.
Insider Transactions Reported
| Date | Insider | Shares | Type | Transaction | Value* |
|---|---|---|---|---|---|
| Jan 23, 2012 | NORTON THOMAS FOfficer | 5,556 | Direct | Option Exercise | N/A |
| Jan 23, 2012 | NORTON THOMAS FOfficer | 5,556 | Direct | Disposition (Non Open Market) at $9.01 per share. | 50,059 |
| Oct 6, 2011 | PRAW ALBERT ZOfficer | 28,633 | Direct | Statement of Ownership | N/A |
| Oct 3, 2011 | MEZGER JEFFREY TOfficer | 43,970 | Direct | Option Exercise | N/A |
| Oct 3, 2011 | MEZGER JEFFREY TOfficer | 43,970 | Direct | Disposition (Non Open Market) at $5.27 per share. | 231,721 |
| Oct 3, 2011 | HOLLINGER WILLIAM ROfficer | 8,794 | Direct | Option Exercise | N/A |
| Oct 3, 2011 | HOLLINGER WILLIAM ROfficer | 8,794 | Direct | Disposition (Non Open Market) at $5.27 per share. | 46,344 |
It certainly appears the insiders do not like the stock, as there have been no buys anywhere in sight. However, this stock in my opinion is a good short-squeeze candidate, in no small part from the recent home builders' sentiment rise. Additional bullish news from any pre-market data that is positive for the housing market could see a nice short squeeze occur here; Be careful if you choose to short this one, you might get burned.
USANA Health Sciences (USNA) develops, manufactures, distributes, and sells nutritional and personal care products worldwide. It offers two product lines, USANA Nutritionals and Sense.
2/15/12 pps: $37.06
| Share Statistics | |
| Avg Vol (3 month): | 68,540 |
| Avg Vol (10 day): | 105,762 |
| Shares Outstanding: | 15.18M |
| Float: | 6.11M |
| % Held by Insiders: | 54.02% |
| % Held by Institutions: | 39.20% |
| Shares Short (as of Jan 31, 2012): | 2.41M |
| Short Ratio (as of Jan 31, 2012): | 40.60 |
| Short % of Float (as of Jan 31, 2012): | 45.00% |
| Shares Short (prior month): | 2.50M |
With 45% of the float held short, investors do not seem to like USNA'S prospects for this year. However, on Feb. 7, 2012, USNA reported better than expected Q4 11 earnings; The company met expectations on revenue and beat expectations on earnings per share.
Compared with the prior-year quarter, revenue increased and GAAP earnings per share expanded significantly.
Even with the good earnings, USANA stock still has heavy short interest. The pps on February7, was $35.90, so some shorts likely have covered since then.
Insider Transactions Reported
| Date | Insider | Shares | Type | Transaction | Value* |
|---|---|---|---|---|---|
| Feb 13, 2012 | MACUGA DANIEL A.Officer | 4,524 | Direct | Option Exercise at $26.06 per share. | 117,895 |
| Feb 13, 2012 | MACUGA DANIEL A.Officer | 4,524 | Direct | Sale at $38.04 per share. | 172,092 |
| Feb 13, 2012 | TRUETT ROYOfficer | 5,184 | Direct | Option Exercise at $26.06 per share. | 135,095 |
| Feb 13, 2012 | TRUETT ROYOfficer | 5,184 | Direct | Sale at $38.04 per share. | 197,199 |
| Feb 13, 2012 | BRAMBLE JAMESOfficer | 5,172 | Direct | Option Exercise at $26.06 per share. | 134,782 |
| Feb 13, 2012 | BRAMBLE JAMESOfficer | 5,172 | Direct | Sale at $37.96 per share. | 196,329 |
| Feb 10, 2012 | WOO DEBORAHOfficer | 2,365 | Direct | Option Exercise at $26.06 per share. | 61,631 |
| Feb 10, 2012 | WOO DEBORAHOfficer | 2,365 | Direct | Sale at $37.15 per share. | 87,859 |
| Feb 8, 2012 | GULL HOLDINGS LTDBeneficial Owner (10% or more) | 21,000 | Direct | Automatic Sale at $35.13 per share. | 737,730 |
| Feb 8, 2012 | WENTZ MYRON WDirector | 21,000 | Indirect | Automatic Sale at $35.13 per share. | 737,730 |
Above, we see mainly automatic sales from option grants. The rest are flat out sales, so the insiders appear bearish. This stock could be a short-squeeze candidate if earnings data continue to improve.
MolyCorp (MCP) is a development stage company that focuses on the production and sale of rare earth oxides from stockpiled feedstocks in the western hemisphere. The company operates the Mountain Pass mine, a non-Chinese rare earth deposit located in San Bernardino County, California
2/15/12 pps: $26.28
I wrote a prior article not too long ago about Molycorp that was rather harsh on the company. I have since lightened up a bit on it, but still believe that until proven otherwise, Molycorp is mainly about over-hyped dreams of literally striking it rich in the rare earth elements mining bonanza. The heavy short interest seems to back up my current point of view on Molycorp;
| Share Statistics | |
| Avg Vol (3 month): | 3,927,510 |
| Avg Vol (10 day): | 3,426,860 |
| Shares Outstanding: | 83.90M |
| Float: | 51.83M |
| % Held by Insiders: | 30.68% |
| % Held by Institutions: | 55.10% |
| Shares Short (as of Jan 31, 2012): | 17.19M |
| Short Ratio (as of Jan 31, 2012): | 4.30 |
| Short % of Float (as of Jan 31, 2012): | 38.40% |
| Shares Short (prior month): | 17.30M |
Nearly 40% of the float is held short, and the pps has been under some pressure lately. Let's see how the insiders may feel about Molycorp's prospects of hitting the rare earth elements jackpot;
Insider Transactions Reported
| Date | Insider | Shares | Type | Transaction | Value* |
|---|---|---|---|---|---|
| Dec 15, 2011 | SMITH MARK A.Officer | 5,000 | Direct | Purchase at $27.95 per share. | 139,750 |
| Aug 30, 2011 | HENRY CHARLES RDirector | 63,901 | Direct | Disposition (Non Open Market) at $0 per share. | N/A |
| Aug 15, 2011 | SMITH MARK A.Officer | 4,200 | Indirect | Purchase at $59.02 per share. | 247,884 |
| Jul 29, 2011 | ASHBURN JOHN F. JR.Officer | 10,000 | Direct | Disposition (Non Open Market) at $0 per share. | N/A |
| Jun 15, 2011 | BHAPPU ROSS R.Director | 5,747,883 | Indirect | Sale at $51 per share. | 293,142,033 |
| Jun 15, 2011 | ASHBURN JOHN F. JR.Officer | 68,604 | Direct | Sale at $51 per share. | 3,498,804 |
We do not see any recent buys above except for one; a December 2011 purchase of 5000 shares @ $27.25. If the prospects are so good with Molycorp's California mine producing a significant amount of rare earth elements, why aren't insiders loading up on shares?
I will believe the Molycorp story when I see it. Until then, it is mainly hype in my strong opinion. However, the danger is large holding shares short in the stock; if Molycorp does start producing tons of rare earth elements, you can find yourself stuck in a massive short squeeze that could likely break you.
Goodrich Petroleum Corporation (GDP) is an independent oil and gas company engaging in the exploration, development, and production of oil and natural gas properties. It focuses on the Haynesville Shale and Cotton Valley Taylor sand in northwest Louisiana, and east Texas; and the Eagle Ford Shale in south Texas.
2/15/12 pps: $18.10
| Share Statistics | |
| Avg Vol (3 month): | 950,794 |
| Avg Vol (10 day): | 696,450 |
| Shares Outstanding: | 36.13M |
| Float: | 25.77M |
| % Held by Insiders: | 28.80% |
| % Held by Institutions: | 89.90% |
| Shares Short (as of Jan 31, 2012): | 8.65M |
| Short Ratio (as of Jan 31, 2012): | 6.00 |
| Short % of Float (as of Jan 31, 2012): | 33.40% |
| Shares Short (prior month): | 8.70M |
At a little over 33% of the float held short, GDP has a very high short interest. Goodrich recently announced plans for oil production growth of 130% to 160%. The company has allocated approximately 75% of its $235 million to $260 million drilling and completion budget toward liquids plays. More than 50% of this capital is heading toward the Eagle Ford Shale in Texas, where the company plans to drill 29 gross wells.
I am skeptical on whether GDP can succeed here in raising its oil production growth to the percentage level it claims. With a high short interest in the stock, it appears many hold the same sentiment.
Insider Transactions Reported
| Date | Insider | Shares | Type | Transaction | Value* |
|---|---|---|---|---|---|
| Jan 19, 2012 | KILLELEA MICHAEL JOfficer | 1,666 | Direct | Option Exercise | N/A |
| Jan 19, 2012 | KILLELEA MICHAEL JOfficer | 511 | Direct | Disposition (Non Open Market) at $14.06 per share. | 7,184 |
| Jan 6, 2012 | MALLOY PATRICK EOfficer | 4,000 | Direct | Option Exercise at $4.11 per share. | 16,440 |
| Dec 9, 2011 | SMAJSTRLA DAWNOfficer | 1,538 | Direct | Option Exercise | N/A |
| Dec 9, 2011 | SMAJSTRLA DAWNOfficer | 407 | Direct | Disposition (Non Open Market) at $15.36 per share. | 6,251 |
| Dec 9, 2011 | SCHOTT JAN LOfficer | 9,563 | Direct | Option Exercise | N/A |
| Dec 9, 2011 | SCHOTT JAN LOfficer | 2,530 | Direct | Disposition (Non Open Market) at $15.36 per share. | 38,860 |
| Dec 9, 2011 | FERCHAU MARK EOfficer | 18,590 | Direct | Option Exercise | N/A |
| Dec 9, 2011 | FERCHAU MARK EOfficer | 4,918 | Direct | Disposition (Non Open Market) at $15.36 per share. | 75,540 |
| Dec 9, 2011 | KILLELEA MICHAEL JOfficer | 7,803 | Direct | Option Exercise | N/A |
| Dec 9, 2011 | KILLELEA MICHAEL JOfficer | 2,064 | Direct | Disposition (Non Open Market) at $15.36 per share. | 31,703 |
| Dec 9, 2011 | TURNHAM ROBERT C JROfficer | 22,056 | Direct | Option Exercise | N/A |
| Dec 9, 2011 | TURNHAM ROBERT C JROfficer | 5,834 | Direct | Disposition (Non Open Market) at $15.36 per share. | 89,610 |
| Dec 9, 2011 | MALLOY PATRICK EOfficer | 14,824 | Direct | Option Exercise | N/A |
| Dec 9, 2011 | GOODRICH WALTER GOfficer | 24,576 | Direct | Option Exercise | N/A |
| Dec 9, 2011 | GOODRICH WALTER GOfficer | 7,127 | Direct | Disposition (Non Open Market) at $15.36 per share. | 109,470 |
| Dec 9, 2011 | GOODRICH HENRYDirector | 1,889 | Direct | Option Exercise | N/A |
| Dec 2, 2011 | SCHOTT JAN LOfficer | 3,198 | Direct | Option Exercise | N/A |
| Dec 2, 2011 | SCHOTT JAN LOfficer | 846 | Direct | Disposition (Non Open Market) at $15.62 per share. | 13,214 |
| Dec 2, 2011 | FERCHAU MARK EOfficer | 9,323 | Direct | Option Exercise | N/A |
| Dec 2, 2011 | FERCHAU MARK EOfficer | 2,466 | Direct | Disposition (Non Open Market) at $15.62 per share. | 38,518 |
| Dec 2, 2011 | KILLELEA MICHAEL JOfficer | 3,386 | Direct | Option Exercise | N/A |
| Dec 2, 2011 | KILLELEA MICHAEL JOfficer | 896 | Direct | Disposition (Non Open Market) at $15.62 per share. | 13,995 |
| Dec 2, 2011 | TURNHAM ROBERT C JROfficer | 11,061 | Direct | Option Exercise | N/A |
| Dec 2, 2011 | TURNHAM ROBERT C JROfficer | 2,926 | Direct | Disposition (Non Open Market) at $15.62 per share. | 45,704 |
| Dec 2, 2011 | MALLOY PATRICK EOfficer | 7,524 | Direct | Option Exercise | N/A |
| Dec 2, 2011 | GOODRICH WALTER GOfficer | 12,325 | Direct | Option Exercise | N/A |
| Dec 2, 2011 | GOODRICH WALTER GOfficer | 3,260 | Direct | Disposition (Non Open Market) at $15.62 per share. | 50,921 |
As we can clearly see, nothing but selling and option exercising dating back to December 2011.
We keep seeing the same combination with the above companies; high short interest, and insiders bearish about the company stock. Just seeing one of these things in a stock in and of itself is not a red flag for me, but when I see both combined, the red flag gets raised.
The inherit danger of holding shorts is getting creamed in a short squeeze so badly, you receive a margin call. If this happens, you will be forced to liquidate other positions, and/or deposit more funds in your account just to cover the short, so consider this carefully before shorting any stock.
*All Data sourced from Yahoo Finance
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.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
