Do you consider yourself a contrarian investor? If you like to look for opportunities where others are pessimistic, your answer might be yes. We ran a screen with this idea in mind.
We began by screening the tech sector for stocks that are seeing investor pessimism, with float shorts above 15%. We then screened these names for those with strong sales trends, comparing growth in revenue to growth in accounts receivable year-over-year.
Accounts receivable is the portion of revenue not yet received, and since there is no guarantee it will ever be received, the smaller the portion of revenue comprised of receivables the healthier the revenue.
We screened for stocks seeing faster growth in revenue than accounts receivable year-over-year, as well as receivables comprising a smaller portion of current assets over the same time period, indicating healthy liquidity trends.
Interactive Chart: Press Play to compare changes in market cap over the last two years for the stocks mentioned below. Analyst ratings sourced from Zacks Investment Research.
Do you think these stocks deserve to be highly shorted? Use this list as a starting point for your own analysis.
List sorted by difference between growth in revenue and accounts receivable over the last year.
1. Mitek Systems Inc. (MITK): Develops, sells, and services software solutions related to mobile imaging applications and intelligent recognition software in the United Stats and Internationally. Market cap at $135.99M. Price at $5.55. Float short at 25.32%. Revenue grew by 151.43% during the most recent quarter ($3.52M vs. $1.4M y/y). Accounts receivable grew by 88.34% during the same time period ($3.07M vs. $1.63M y/y). Receivables, as a percentage of current assets, decreased from 41.69% to 14.69% during the most recent quarter (comparing 3 months ending 2011-12-31 to 3 months ending 2010-12-31).
2. Ancestry.com Inc. (ACOM): Operates as an online resource for family history for subscribers worldwide. Market cap at $1.00B. Price at $24.02. Float short at 22.77%. Revenue grew by 25.98% during the most recent quarter ($104.22M vs. $82.73M y/y). Accounts receivable grew by -37.93% during the same time period ($9.36M vs. $15.08M y/y). Receivables, as a percentage of current assets, decreased from 15.68% to 12.85% during the most recent quarter (comparing 3 months ending 2011-12-31 to 3 months ending 2010-12-31).
3. Aruba Networks, Inc. (ARUN): Provides distributed enterprise networks that securely connect local and remote users to corporate information technology resources worldwide. Market cap at $2.36B. Price at $20.50. Float short at 20.26%. Revenue grew by 34.54% during the most recent quarter ($126.28M vs. $93.86M y/y). Accounts receivable grew by 28.27% during the same time period ($69.23M vs. $53.97M y/y). Receivables, as a percentage of current assets, decreased from 20.01% to 16.54% during the most recent quarter (comparing 3 months ending 2012-01-31 to 3 months ending 2011-01-31).
*Accounting data sourced from Google Finance, all other data sourced from Finviz.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.