Three Short Ideas: PF Chang's, Palm, LDK Solar

Includes: LDK, PALM, PFCB
by: The Stock Masters

Has anyone else noticed it's getting harder and harder to find "cheap" stocks lately? I for one, have.

I'm thinking once the market hits 10,000, the Sith will reign again. Give yourself to the Dark Side. Together, we will rule the Galaxy (via short positions in the imminent bear market).

It's pointless to resist.

The bears have begun to build up short positions in P.F. Chang's (NASDAQ:PFCB), Palm (PALM), and LDK Solar (NYSE:LDK).

Before we get into these, remember that if the Market decides to go higher, the short squeeze on these stocks could leave your portfolio in ruins. But with the correct timing, you will look like a genius shorting these at the right time, just before the market begins an inevitable correction. Proceed with caution.

P.F. Chang's China Bistro

38% Short Interest

If we've learned anything from South Park, it's that P.F. Chang's will leave you constipated for 2 days straight.

Chang's is ripe for a short position. Although the company beat revenue expectation by .10 during Q2, The Company continues to expect a negative sales environment for the remainder of 2009. As a result, the Company anticipates average weekly sales for fiscal 2009 to decline approximately 6% to 7% at the Bistro and approximately 3% to 4% at Pei Wei. Consolidated revenues for fiscal 2009 are expected to increase 1% to 2% compared to fiscal 2008.

As you know, Wall St. only cares about short term results. So look for PFCB to fall for the rest of the year.

Palm, Inc.

36% Short Interest

The rapid rise in Palm can be attributed to its Palm Pre - and a massive short squeeze.

But analyst Tim Long of BMO Capital Markets last week started the stock at "market perform," saying that Palm's future lies squarely in its ability to manage its core business -- developing and selling smartphones -- against proven names like RIMM and its BlackBerry.

"Our concerns are based on the competitiveness of the market and the company's history of lackluster execution. There has also been a lot of speculation that Palm is an acquisition target of a number of companies, which we think is unlikely," he said.

Once the acquisition talk starts to fizzle, so will PALM's share price.

LDK Solar Co., Ltd.

37% Short Interest

This may be the most risky play of all. With a 52 week range of $3.75 - $52.40, shares are well below peak value. However, look how the bears have been slowly building a position in the stock over the course of the year. If the market goes down like I think it will when we hit 10,000, you can expect LDK shares to be cut in half.

Settlement Date Short Interest Avg Daily Share Volume Days To Cover
7/15/2009 19,696,955 3,839,939 5.129497
6/30/2009 18,044,181 5,219,744 3.456909
6/15/2009 15,863,243 7,605,550 2.085746
5/29/2009 13,719,877 4,743,613 2.892284
5/15/2009 13,174,842 3,413,614 3.859500
4/30/2009 12,743,758 2,066,448 6.166987
4/15/2009 14,574,509 3,817,689 3.817626
3/31/2009 12,699,177 4,510,052 2.815750
3/13/2009 11,831,376 2,248,926 5.260901
2/27/2009 11,456,477 3,401,303 3.368261
2/13/2009 10,609,242 1,765,787 6.008223
1/30/2009 9,528,951 1,502,191 6.343368
1/15/2009 10,850,336 2,699,144 4.019917

Disclosure: No positions in PFCB, PALM, or LDK.