5 Stocks With High Short Interest That Insiders Appear Bearish On

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 |  Includes: BKS, GDPM, KBH, MCPIQ, USNA
by: StockMatusow

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
Click to enlarge

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
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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
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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
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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
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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
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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
Click to enlarge

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
Click to enlarge


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
Click to enlarge

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
Click to enlarge


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

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.