Central Banks Take On Euro Crisis: Will These Stocks Benefit?

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Central banks (finally) took action on Wednesday to stifle the euro crisis by providing cheaper dollar liquidity to starved European banks facing credit crunches.

Reuters reports that the move came as a surprise. The coordinated intervention of central banks include The Bank of Canada, the Bank of England, the Bank of Japan, the European Central Bank, the Federal Reserve and the Swiss National Bank.

Together their actions "enhance their capacity to provide liquidity support to the global financial system," according to the full announcement from the ECB. Essentially the move makes it easier for the ECB, and thus European banks, to borrow dollars.

"It's not a solution to the euro crisis by any means; it just means that the most acute liquidity problems will be mitigated for now," writes Joe Weisenthal of Business Insider.

Reactions
The market has rallied around the news. The euro's value as well as European stocks soared. The DJIA is up over 400 points. NASDAQ is up 83 points.

Of course, whenever breaking news leads to rallies, opinions will differ on whether the positive reactions will continue in the long term.

According to one pessimist, PIMCO CEO Mohamed El-Erian, the supply of credit to households and businesses and help[ing] foster economic activity may be a nice goal, but it's not one the banks can achieve with these current measures.

Investing ideas
Interested in trading on the idea that stocks will continue to benefit from the news?

To find some ideas, we created a list of S&P 500 stocks seeing bearish short trends, meaning over the last month, short-sellers have increased bets the stock will fall.

These names could have the most to gain from a reverse in the economic trend. If that's the case, short sellers should be prepared for a short squeeze. This is when short-sellers must close out their positions (buying back the stock), causing the stock to rally even higher than before. If you are holding the stock, this is a good event.

Do you think these stocks are about to see a short squeeze? (Click here to access free, interactive tools to analyze these ideas.)

1. CMS Energy (NYS: CMS) : Operates as an energy company primarily in Michigan. Market cap of $5.17B. Shares shorted have increased from 12.77M to 17.60M month-over-month, a change representing 1.94% of the company's 249.50M share float. Relatively low correlation to the market (beta = 0.54), which may be appealing to risk averse investors. The stock is a short squeeze candidate, with a short float at 6.96% (equivalent to 5.42 days of average volume). The stock has gained 18.47% over the last year.

2. Denbury Resources (NYS: DNR) : Engages in the acquisition, exploitation, drilling, and extraction of oil and natural gas properties in the Gulf Coast region located in Mississippi, Texas, Louisiana, and Alabama. Market cap of $6.26B. Shares shorted have increased from 15.37M to 19.64M month-over-month, a change representing 1.10% of the company's 389.58M share float. The stock has lost 12.1% over the last year.

3. First Solar (NAS: FSLR) : First Solar, manufactures and sells solar modules using a thin-film semiconductor technology. Market cap of $3.79B. Shares shorted have increased from 21.08M to 22.43M month-over-month, a change representing 2.27% of the company's 59.57M share float. The stock is a short squeeze candidate, with a short float at 37.09% (equivalent to 5.61 days of average volume). The stock has performed poorly over the last month, losing 18.86%.

4. GameStop (NYS: GME) : Operates as a retailer of video game products and personal computer (PC) entertainment software. Market cap of $3.16B. Shares shorted have increased from 37.92M to 39.36M month-over-month, a change representing 1.05% of the company's 136.96M share float. The stock is a short squeeze candidate, with a short float at 28.76% (equivalent to 10.73 days of average volume). The stock has performed poorly over the last month, losing 13.17%.

5. R.R. Donnelley & Sons (NYS: RRD) : Provides pre-media, printing, logistics, and business process outsourcing products and services to private and public sectors worldwide. Market cap of $2.72B. Shares shorted have increased from 18.63M to 21.87M month-over-month, a change representing 1.74% of the company's 186.21M share float. The stock is a short squeeze candidate, with a short float at 11.58% (equivalent to 6.67 days of average volume). The stock has performed poorly over the last month, losing 11.06%.

6. TE Connectivity (NYS: TEL) : Provides engineered electronic components, network solutions, specialty products, and subsea telecommunication systems. Market cap of $13.19B. Shares shorted have increased from 1.40M to 11.52M month-over-month, a change representing 2.39% of the company's 423.34M share float. The stock has performed poorly over the last month, losing 13.98%.

7. Teradyne (NYS: TER) : Provides automatic test equipment products and services worldwide. Market cap of $2.22B. Shares shorted have increased from 14.97M to 19.99M month-over-month, a change representing 2.74% of the company's 183.30M share float. Might be undervalued at current levels, with a PEG ratio at 0.85, and P/FCF ratio at 7.34. The stock is a short squeeze candidate, with a short float at 10.91% (equivalent to 5.04 days of average volume). It's been a rough couple of days for the stock, losing 6.14% over the last week.

Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the stocks mentioned above. Analyst ratings sourced from Zacks Investment Research.


Kapitall's Rebecca Lipman owns shares of FSLR. Short data sourced from Yahoo! Finance.

At the time this article was published The Motley Fool owns shares of Denbury Resources, First Solar, and GameStop. Motley Fool newsletter services have recommended buying shares of First Solar. Motley Fool newsletter services have recommended writing covered calls in GameStop. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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