Marc Chaikin's  Instablog

Marc Chaikin
Send Message
After more than 40 years on Wall Street, Marc Chaikin founded Chaikin Analytics LLC in 2009 to deliver proven stock analytics to financial service professionals and individual investors. With the Chaikin Power Gauge, an alpha-generating quantitative model as its centerpiece, Chaikin Analytics... More
My company:
Chaikin analytics llc
My blog:
Chaikin Power Gauge Stock Rating Blog
  • Five Stocks Ripe For a Short Squeeze 0 comments
    Oct 26, 2010 2:36 PM | about stocks: TER, JAKK, DSW, WNR

    We have identified five fundamentally strong companies with a bullish Chaikin Power Gauge Rating. Because these companies have a high short interest ratio as a percentage of the stock’s float these companies have the potential for explosive short term price action.

    While adverse news in the recent past may have attracted short-sellers any positive events in the next 30- 60 days such as a bullish earnings surprise could act as a catalyst and result in aggressive short covering.

    The two initial screens which we used were a high short interest relative to the float and bullish Power Gauge Rating. From that universe we then narrowed our search to focus on companies with a strong balance sheet and cash flows and recently positive earnings reports. This filtering yielded these five fundamentally sound companies with high short interest and a bullish Chaikin Power Gauge Rating all of which are attractive buy candidates.

    1. Teradyne Inc (NYSE:TER): Semiconductor Equipment and Materials Industry. A high ROI along with relatively low debt/equity ratio and price/sales ratio contribute to Teradyne’s strong Financial Metrics. A low P/E ratio of 11, a very low PEG ratio of 0.28 and strong cash flows make this profitable company very attractive at current price. Recent Earnings Surprises, fuelling upward changes in Analyst Estimates along with recent Insider Buying positions Teradyne for an upward move. Prepare for a possible short squeeze in the near term.

    2. JAKKS Pacific Inc (NASDAQ:JAKK): Toys and Games Industry. Low price/sales ratio and price/book ratio contribute to the company’s strong Financial Metrics. The company has an attractive P/E ratio and generates steady free cash flow which will allow it to do well even in tough times. We think that with strong Price Volume activity, any Earnings Surprise going forward will likely propel JAKKS to higher highs going into the holiday shopping season. Look to buy ahead of any news, which could trigger a short covering.

    3. Rino International Corporation (OTC:RINO): Pollution and Treatment Controls Industry. This is our only international play in this list. With consistent Earnings Surprises and very low projected P/E ratio, Rino International keeps generating high ROI yet it is trading around the same levels where it was at the start of the year. The company operates with high profit margins and has a good amount of cash on hand. If RINO continues its recent strong price performance, it could force shorts to cover. Add this to your watch list if you are considering diversification into international markets.

    4. DSW Inc (NYSE:DSW): Apparel Store Industry. DSW boasts a healthy balance sheet with lots of cash on hand, strong free cash flows and no debt. An attractive price/sales ratio and ROI contribute towards strong financial metrics. We believe that recent expansions will fuel revenue growth and thus increase profits for an already profitable company. This company should continue its upward trend so be careful if you are short. Longs, any single significant news could create a short squeeze so be on the lookout. If in the near term the stock does dip, consider this as a buying opportunity.

    5. Western Refining Inc (NYSE:WNR): Oil and Gas Refining and Marketing Industry. Western Refining boasts very attractive price/sales ratio and price/book ratio. Periodic Insider Buying while the company is pushing higher highs indicates that even at current prices, WNR might be an attractive buy. Although the company has significant debt, it is not a surprise given the industry it is in. It actually boasts a relatively strong price compared to its industry and to the broader market.

    Disclosure: No positions

    Stocks: TER, JAKK, DSW, WNR
Back To Marc Chaikin's Instablog HomePage »

Instablogs are blogs which are instantly set up and networked within the Seeking Alpha community. Instablog posts are not selected, edited or screened by Seeking Alpha editors, in contrast to contributors' articles.

Comments (0)
Track new comments
Be the first to comment
Full index of posts »
Latest Followers


More »

Latest Comments

Instablogs are Seeking Alpha's free blogging platform customized for finance, with instant set up and exposure to millions of readers interested in the financial markets. Publish your own instablog in minutes.