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Looking to avoid value traps? A historically low share price may seem attractive to an investor who hasn't done their research, but we can protect ourselves by taking cues from the actions of institutional investors, who are known for their in depth analysis. We ran a screen with this in mind.

In creating our screen we began by looking for stocks with troubling accounting signs. While there are many ways to go about this, we chose to look for names with falling current ratios.

The higher the current ratio, the more capable the company is in covering its liabilities. Naturally, a falling current ratio is troubling. We screened for stocks with current ratios that have consistently dropped over 3 12-month intervals and fallen below a ratio of 3.

Next we screened these names for those with bearish sentiment from institutional investors, with significant net institutional sales over the last quarter representing at least 5% of share float. This indicates that institutional investors such as hedge fund managers and mutual fund managers expect these names to underperform.

Lastly, (and here's a real "contrarian" edge) we took the stocks for which short sellers are increasing their short positions month over month. Because short sellers benefit when share price falls, this signals that short sellers collectively believe share price has more downside to price in.

Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for stocks mentioned below. Analyst ratings sourced from Zacks Investment Research. (click to enlarge)

Tool provided by Kapitall.com.

The stocks listed below are signaling 3 bearish trends, but do you think these names will drop like short sellers and smart money expect? Use this list as a starting point for your own analysis.

List Average 1-Year Return: 28%.

1. Heckmann Corporation (HEK): A holding company, acquires or makes investments in various businesses. Market cap at $637.18M, most recent closing price at $4.20. Current Ratios decreased from 23.04 to 4.28 during the first time interval (12 months ending 2009-12-31 vs. 12 months ending 2008-12-31). For the second time interval, Current Ratios decreased from 4.28 to 3.72 (12 months ending 2010-12-31 vs. 12 months ending 2009-12-31). And for the final time interval, Current Ratios decreased from 3.72 to 2.83 (12 months ending 2011-12-31 vs. 12 months ending 2010-12-31).

Net institutional sales in the current quarter at -22.4M shares, which represents about 17.29% of the company's float of 129.55M shares. Shares shorted have increased from 30.13M to 34.47M over the last month, an increase which represents about 3.35% of the company's float of 129.55M shares. Days to cover ratio at 8.99 days.

2. Spreadtrum Communications Inc. (SPRD): Operates as a fabless semiconductor company that designs, develops, and markets baseband processor and RF transceiver solutions for wireless communications and mobile television markets. Market cap at $941.41M, most recent closing price at $20.51. Current Ratios decreased from 3.12 to 2.01 during the first time interval (12 months ending 2009-12-31 vs. 12 months ending 2008-12-31). For the second time interval, Current Ratios decreased from 2.01 to 1.49 (12 months ending 2010-12-31 vs. 12 months ending 2009-12-31). And for the final time interval, Current Ratios decreased from 1.49 to 1.47 (12 months ending 2011-12-31 vs. 12 months ending 2010-12-31).

Net institutional sales in the current quarter at -2.6M shares, which represents about 7.99% of the company's float of 32.56M shares. Shares shorted have increased from 2.72M to 3.50M over the last month, an increase which represents about 2.4% of the company's float of 32.56M shares. Days to cover ratio at 3.49 days.

3. United Rentals, Inc. (URI): Operates as an equipment rental company in the United States and Canada. Market cap at $3.07B, most recent closing price at $32.71. Current Ratios decreased from 2.59 to 1.86 during the first time interval (12 months ending 2009-12-31 vs. 12 months ending 2008-12-31). For the second time interval, Current Ratios decreased from 1.86 to 1.49 (12 months ending 2010-12-31 vs. 12 months ending 2009-12-31). And for the final time interval, Current Ratios decreased from 1.49 to 0.96 (12 months ending 2011-12-31 vs. 12 months ending 2010-12-31).

Net institutional sales in the current quarter at -7.0M shares, which represents about 7.6% of the company's float of 92.16M shares. Shares shorted have increased from 12.85M to 14.90M over the last month, an increase which represents about 2.22% of the company's float of 92.16M shares. Days to cover ratio at 4.41 days.

*Institutional and price data sourced from Yahoo! Finance, all other data sourced from Finviz.

Source: 3 Illiquid Stocks With Institutional Selling And Increasing Shorts