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  • 8 Small Cap Stocks With Significant Short Selling 0 comments
    Apr 30, 2014 12:21 PM | about stocks: ALJ, AMKR, AMRI, CRK, DMND, GDP, PVA, SUSS

    Small cap stocks have had an amazing bull run. Does increased institutional short selling signal the end?

    Lots of attention has been directed toward the rise and fall of big names during the recent stock market bull run.Facebook (FB), Twitter (TWT), Google (GOOG) and Apple (APPL) results dominate headlines as pundits and analysts try to determine whether we can expect to see more upside, or if smart money is betting on a contraction.

    According to Alexis Xydias at Bloomberg, smart money appears to be betting against small cap stocks. Fund manager Eric Cinnamond says, "small-cap stocks are the most expensive I've ever seen them." The rising tide that lifted the entire Russell 2000 lifted some junk along with it. As last year's wave of optimism crests and retreats, overvalued small caps are sitting ducks for short sellers.

    To see what stocks are most likely to be targeted by institutional short selling, we set up a screen to look for companies with market caps between $300 million and $2 billion that are 20% above their 200 day simple moving average (200SMA). This indicates they have risen with broader the bull market.

    Read more about free cash flows and EPS trends.

    Then we narrowed the search by looking for stocks with 20% of their stock float shorted. Finally, we looked for companies that have high debt-to-equity ratios. If there are any future glitches in the recovery, these stocks will be the first to get hit.

    Out of that list we got some surprising results. Amkor Technology, Inc. (AMKR), which provides outsourced semiconductor packaging and test services to integrated device manufacturers, "fabless" semiconductor companies and contract foundries, shows both encouraging inventory turnover and accounts receivable trends. Alon USA Energy, Inc. (ALJ), which engages in refining and marketing petroleum products in the south western United States, appears undervalued by its levered free cash flow to enterprise value (LFCF/EV).

    That is to say, despite sending up red flags, some of these companies may squeeze the short sellers and turn out to be good long term investments.

    Do you think these companies will defy expectations, or are clouds on the economic horizon predicting a fall in these stocks? Use the links below to begin your own analysis.

    Click on the interactive chart to view data over time.

    1. Alon USA Energy, Inc. (alj, Earnings, Analysts, Financials): Operates as an independent refiner and marketer of petroleum products in south central, southwestern, and western regions of the United States. Market cap at $910.81M, most recent closing price at $14.48.

    2. Amkor Technology, Inc. (AMKR, Earnings, Analysts, Financials): Provides outsourced semiconductor packaging and test services in the United States and internationally. Market cap at $1.23B, most recent closing price at $5.70.

    3. Albany Molecular Research Inc. (AMRI, Earnings, Analysts, Financials): Provides contract services to various pharmaceutical and biotechnology companies primarily in the United States, Europe, and Asia. Market cap at $482.25M, most recent closing price at $15.03.

    4. Comstock Resources Inc. (CRK, Earnings, Analysts, Financials): Engages in the acquisition, development, production, and exploration of oil and natural gas properties in the United States. Market cap at $937.61M, most recent closing price at $20.31.

    5. Diamond Foods, Inc. (DMND, Earnings, Analysts, Financials): Engages in processing, marketing, and distributing snack products, as well as culinary, in-shell, and ingredient nuts. Market cap at $629.42M, most recent closing price at $28.67.

    6. Goodrich Petroleum Corp. (GDP, Earnings, Analysts, Financials): Engages in the exploration, development, and production of oil and natural gas properties. Market cap at $475.31M, most recent closing price at $12.94.

    7. Penn Virginia Corporation (PVA, Earnings, Analysts, Financials): Engages in the exploration, development, and production of natural gas and oil in various domestic onshore regions of the United States, including Texas, Appalachia, the Mid-Continent, and Mississippi. Market cap at $982.63M, most recent closing price at $15.01.

    8. Susser Holdings Corporation (SUSS, Earnings, Analysts, Financials): Operates convenience stores and distributes motor fuels in Texas, New Mexico, Oklahoma, and Louisiana. Market cap at $1.28B, most recent closing price at $60.63.

    (List compiled by Will Kenton. Financial data sourced from Finviz and Zacks Investment Research.)

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

    Additional disclosure: Kapitall is a team of analysts. This article was written by Will Kenton, one of our writers. We did not receive compensation for this article (other than from Seeking Alpha), and we have no business relationship with any company whose stock is mentioned in this article.

    Themes: small cap stocks Stocks: ALJ, AMKR, AMRI, CRK, DMND, GDP, PVA, SUSS
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