Articles filed under "short sellers"
Though a chunk of operations is in after-market sales and servicing, Joy Global is still very much a live-by-the-commodity-cycle/die-by-the-commodity-cycle business. So last year the shorts did okay as Joy Global’s price fell more than 10% given that major mined commodities -- coal foremost -- were still working through a big supply overhang.
But what’s interesting is that the shorts are still not retreating from Joy Global -- even though since September the stock has outperformed the S&P 500 -- while Caterpillar (CAT) isn’t feeling nearly the amount of heat.
In almost any other company, a 50% share price rally in the weeks following an earnings announcement would reflect real optimism about its future. But for Sears Holding (SHLD), that kind of buying may mean something else entirely.
As seen in a stock chart, Sears shares are trading near its 52-week high, having climbed after an initial fall on its earnings report Aug. 22. Its loss per share in the second quarter, which analysts had estimated at $1.10, was considerably larger at $1.46, and revenues were slightly less than forecasts called for. There’s been no official news from the company in the weeks since earnings to make Sears prospects for running Sears department stores and Kmart stores look any brighter. Christmas sales forecasts for retailers generally this year are week.
This, however, is viewed as good news for a lot of Sears shareholders. Many shareholders – Baker Street Capital estimates it’s those holding some 93.5% of actively traded outstanding shares -- are in the company as an asset play instead of turnaround bet. This group sees the value of their shares going up as Sears, in its desperation, sells off valuable parts like Sears Protection (it sells warranties), Sears Auto, Lands End or Sears Canada. Earlier in September, Baker Street published research estimating a break-up value of Sears at $131 a share, more than twice today’s valuation.
Bets against Joy Global (JOY), the smaller rival to Caterpillar (CAT) have spiked of late. Short interest in the mining equipment and servicing firm has more than tripled in 2013. As a percentage of Joy Global’s float, shorts are also more than triple the level for Caterpillar.
It’s not exactly a secret what ails both Joy Global and Caterpillar, whose stock prices are down 22% and 7% respectively in 2013. Amid a sluggish global economic recovery, the need to pull more commodities out of the earth has fallen off sharply, pushing prices down and causing mines to close.
It’s been a rough year for short sellers all around, but perhaps no company has so consistently baffled its doubters as GameStop (GME). Not only has its share price nearly doubled since February, its share price trajectory gave short sellers very few opportunities to cover their pessimistic bets along the way. And boy, there were a lot of pessimists.
Between the end of February and mid June, short sellers held between 31% and 38% of GameStop’s public float, according to NASDAQ records. That was high enough at times to put it among the most shorted shares in the market.
GameStop’s share price, however, recorded only one significant decline during that period; a 19% drop in the week of May 20. The share price was climbing again by the end of the month. The week of May 15 – the optimal time to be holding shares short to cash in on that decline – happens to have been the low point of short holdings for the period.
Analysis published this week by the Wall Street Journal, showing that short sellers got their heads handed to them so far this year, elicits neither pity nor pleasure in these quarters. The stocks that brought shorts the most grief, according to the Journal analysis, seem from here to be momentum plays. And in some cases the shorts may be right, long-term, but were simply ahead of their time in this nutty 2013 bull market (this week’s slide, aside).
One can understand the shorts’ wanting to drill these stocks into the ground. They’re money losers, collectively, offering a fabulous (or at least swell) service or product, but largely unproven as businesses. Their founders and initial investors are getting wealthy (at least on paper, and they often preen about their success), which would tend to make a hard-working short seller envious.
As part of the brilliant Wall Street Journal article and statistical package on the massacre among short sellers so far in 2013, we learn that heavily-shorted stocks at the beginning of the year have in many cases beaten the market and beaten to a bloody pulp the poor money managers who bet on the companies to crumble.
Among the unlikely-seeming 2013 rallies is Pitney Bowes (PBI), which according to the Journal had a stunning 31% of its shares shorted at December 31, 2012, and yet has soared in trading this year, crushing the S&P 500:
We’ve written about Pitney Bowes with some regularity in recent years. Its super-fat dividend yield, and until recently its reliably-rising dividend, recommended it to investors even as the market for postal meters goes, well, the way of the U.S. Postal Service.
Well, since at YCharts we’re in the business of slicing and dicing data, when someone else does a smart job of putting information in the Cuisinart, we tip our hats: today’s Wall Street Journal article and statistical package on the blood letting among short sellers thus far in 2013 is a masterful piece of work.
In brief, the more short sellers ganged up on a stock, the better it seemed to do this year.
Among the top-ten-shorted stocks as of December 31, 2012 (as a percentage of shares outstanding) were Questcor Pharmaceuticals (QCOR) at 44%; Deckers Outdoor (DECK) at 43%; Zillow (Z) at 36%; and Herbalife (HLF) at 35%, according to the Journal.
Things have gone badly wrong for miner Cliffs Natural Resources (CLF) this year, as falling price of iron ore it sells helped take nearly 60% of its market cap in six short months. But the shares have become a favorite target for bottom fishers in recent weeks. It’s a bet that could pay out big or disappoint horribly.
Cliff’s share price is up about 53% in the past month, as seen in a stock chart, and at least two analysts have moved to buy recommendations on the shares in the past three months. However, the vast majority of them rank it as a hold, and several maintain sell recommendations.
Cliff’s, with about $6.5 billion in annual revenue pre-crisis, is a small player in a business dominated by foreign miners Vale (VALE), BHP Billiton (BHP) and Rio Tinto (RIO). Those three giants dominate the seaborne iron ore market that ships the commodity to coastal steel mills around the world. Investors in those miners have suffered this year, too.
IMAX Corp., (IMAX) known for its bigger-than-life movie screens, can also boast a larger-than-life PE ratio and a growing interest amongst the community of short sellers. Does that make IMAX a stock to shun, or are there longer-term opportunities that investors can still capture here?
The bears’ rationale is fairly straightforward, and they got some earnings season support. The company’s earnings have proved disappointing: IMAX reported net income of 22 cents a share for the quarter ended June 30, while analysts had been expecting a figure closer to 28 cents a share. That isn’t the only disappointment. The summer’s list of prospective blockbusters has been a mixed bag, and at least some of IMAX’s stock price gains over the year to date have been in anticipation of a big summer for blockbusters. Instead, one of the big films playing on IMAX screens has been one of the biggest slumps, Pacific Rim, which hasn’t even generated $100 million in gross revenues yet, meaning that it’s far from recouping its estimated budget of $190 million.
Jim Chanos, long-time short seller, disclosed earlier this month that he was short Caterpillar (CAT), suggesting commodity-price declines (Cat machines dig some commodities up and prepare land for planting others) and some dodgy accounting on an acquisition make the stock vulnerable.
Since then, Cat shares are down about 6% while the overall market is flat.
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