Short-sellers, who benefit when share price falls, view themselves as market makers, and certain studies suggest they may have a point. Data show that when the short-sellers begin to move on a stock, a price decline usually isn't far behind.
Despite this, it remains unclear as to whether these traders are prophetic in their anticipation of a price fall or if their very presence in the market scares off all other investors.
With all this in mind, we created a list of companies on the Standard & Poor 500 index that have been experiencing the highest levels of short sales as a percentage of share float. They have also been increasing their short positions month over month. In other words, short-sellers are extremely pessimistic about their future prospects.
Here are our parameters for the list:
- Short float over 15%
- Increased short covering month over month
- Listed on the S&P 500 index
These 6 stocks made the list:
1. Cliffs Natural Resources Inc. (CLF): Produces iron ore pellets, lump and fines iron ore, and metallurgical coal products. Market cap at $5.2B. Float short: 21.09%. Shares shorted have increased from 27.49M to 29.78M over the last month, an increase which represents about 1.62% of the company's float of 141.13M shares. Days to cover ratio at 3.87 days.
2. First Solar, Inc. (FSLR): Manufactures and sells solar modules using a thin-film semiconductor technology. Market cap at $2.08B. Float short: 49.71%. Shares shorted have increased from 28.59M to 29.80M over the last month, an increase which represents about 2.01% of the company's float of 60.06M shares. Days to cover ratio at 3.88 days.
3. J. C. Penney Company, Inc. (JCP): Through its subsidiary, operates department stores in the United States and Puerto Rico. Market cap at $5.58B. Float short: 33.45%. Shares shorted have increased from 56.53M to 59.80M over the last month, an increase which represents about 2.04% of the company's float of 160.47M shares. Days to cover ratio at 7.26 days.
4. Netflix, Inc. (NFLX): Provides subscription based Internet services for TV shows and movies in the United States and internationally. Market cap at $3.87B. Float short: 29.87%. Shares shorted have increased from 15.57M to 16.21M over the last month, an increase which represents about 1.18% of the company's float of 54.21M shares. Days to cover ratio at 3.16 days.
5. Pitney Bowes Inc. (PBI): Provides mail processing equipment and integrated mail solutions worldwide. Market cap at $2.88B. Float short: 30.29%. Shares shorted have increased from 56.20M to 60.60M over the last month, an increase which represents about 2.2% of the company's float of 200.03M shares. Days to cover ratio at 18.5 days.
6. Safeway Inc. (SWY): Operates as a food and drug retailer in North America. Market cap at $3.92B. Float short: 32.16%. Shares shorted have increased from 73.54M to 76.38M over the last month, an increase which represents about 1.2% of the company's float of 237.00M shares. Days to cover ratio at 12.23 days.
Notable runners up: The following two stocks have short floats in the 10-15% range. Interestingly, according to the one-year return chart above these are the only heavily shorted S&P stocks with a positive anual performance. (click to enlarge)
7. Hartford Financial Services Group Inc. (HIG): Provides insurance and financial services in the United States and internationally. Market cap at $9.46B. Float short: 10.87%. Shares shorted have increased from 36.66M to 44.81M over the last month, an increase which represents about 2.02% of the company's float of 403.97M shares. Days to cover ratio at 5.81 days.
8. Dun & Bradstreet Corp. (DNB): Provides commercial information and insight on businesses worldwide. Market cap at $3.66B. Float short: 11.09%. Shares shorted have increased from 4.41M to 4.96M over the last month, an increase which represents about 1.3% of the company's float of 42.15M shares. Days to cover ratio at 8.89 days.
Disclosure: I am long FSLR.
