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By Matt Doiron

The market is up for the year, but a number of stocks not only lag but have seen severe hits to their share prices so far this year. If short sellers thought that the declines in these companies' stock prices were about to continue, then they would maintain existing short positions and even initiate new ones; therefore, by looking for stocks which have declined so far this year but have only a small number of shares short as a percentage of the shares outstanding, we can find stocks which short sellers are at least wary of being more bearish on. Using data from Fidelity, here are 16 large-cap stocks which have fallen at least 25% so far in 2012 but as of last report had short positions of less than 5% of shares outstanding:


Price Performance (this year)

Short as % of Shares Outstanding


Valhi (NYSE:VHI)






Kinross (NYSE:KGC)



Pengrowth Energy (NYSE:PGH)



Penn West Petroleum (NYSE:PWE)



Ralcorp Holdings (RAH)



Pan American Silver (NASDAQ:PAAS)



Genworth Financial (NYSE:GNW)



Enerplus (NYSE:ERF)






SM Energy (NYSE:SM)



Allegheny Technologies (NYSE:ATI)



Electronic Arts (NASDAQ:EA)









The bad news keeps coming at Zynga. We looked at Zynga last month just after a disappointing quarterly report and revisions to guidance sent the stock down even further from its IPO price, and now fellow game company Electronic Arts has filed a lawsuit on the grounds that a new Zynga game is based on EA's own offering. Many of Zynga's games have pretty clear similarities to other companies' properties, so the lawsuit could serve as a dangerous precedent for the company. Zynga has by now fallen all the way to $3 per share.

Electronic Arts has its own issues as the video game industry continues to decline, and in particular as games on smartphones and tablets provide an alternative to console and PC gaming. EA and its fellow game companies hope that the introduction of a new console line will reinvigorate demand for their products, and sell-side analysts think that this will occur to some degree. EA's forward multiple is only 10, which likely drives the weak short selling activity in the stock. Billionaire Ken Griffin's Citadel Investment Group moved heavily into EA in the first quarter of 2012.

IAMGOLD and Kinross are gold miners currently trading at forward P/E ratios of 8 who have both fallen in price so far this year based on sizable decreases in earnings compared to last year. Possibly because of the low earnings multiple, however, short sellers are avoiding taking a position against the stocks. The two companies also trade at enterprise values of around 4.5x trailing EBITDA, and their P/B ratios are not bad looking either- IAMGOLD's is 1.2 while Kinross's is 0.7. IAMGOLD was one of the stocks in John Paulson's portfolio at the end of March.

Finally, Ralcorp, a food company which owns brands such as Post and Honey Bunches of Oats, is down this year after having missed earnings estimates for four quarters in a row; worse, earnings per share fell on a quarter/quarter basis in each of the last three reports, and revenue is down from a year ago as well. Wall Street analysts expect forward earnings to be such that the company's forward P/E is 16, but given the declining business it is not surprising that the price remains low. However, traders seem leery of shorting the stock.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.