Do the Shorts Know Something You Don't?
Since everyone loves a winner, it's reasonable to assume that everyone hates a loser -- everyone but short sellers, at least. These contrarian investors bet that hot stocks are primed to fall, aiming to turn their pessimism into potential profits.
These top companies on the American Stock Exchange had the largest percentage increases in shares short. Combining that with the collective intelligence of Motley Fool CAPS, we'll see which of these companies Fools believe have the power to make short work of short-sellers.
Shares Short Dec 15
Shares Short Nov 30
CAPS Rating (out of 5)
|Rubicon Minerals (ASE: RBY)||4.8||4.3||11.7%||2.2%||****|
|YM BioSciences (ASE: YMI)||3.4||2.7||27.9%||2.9%||***|
Sources: wsj.com. Share counts in millions.
Of course, this isn't a list of stocks to buy -- or short! These stocks could have serious problems that warrant their short interest, but they might also be stricken by short-term troubles. Only Foolish due diligence will tell you for certain; our 180,000-strong CAPS community offers just such a good place to start.
Crossing the Rubicon
While Rubicon Minerals has yet to recover from the drubbing it took after releasing updated resource estimates for its F2 gold-mining project in the prolific Red District region of Ontario, its drilling and exploration efforts continue and are producing encouraging results.
After releasing an initial resource report that indicated an inferred resource of 4 million ounces and suggested it held the potential for between 13 million and 16 million ounces of gold, the update, while still quite good, was far less exuberant. The latest estimates continue in that same vein, offering hope for emergence of a shallow target area, but more importantly, development of a known high-grade gold intercepts in the important area around 1,200 meters. Plans are in place to go beyond 2,000 meters in anticipation of there being real depth to the project. The potential of the F2 project was such that mid-tier producer Agnico-Eagle Mines (NYS: AEM) acquired a stake in Rubicon last summer.
CAPS member SirGalahad71 agrees that the gold miner's currently beaten-down price is too low to be ignored.
I am optimistic that these guys are, literally, sitting on a gold mine and although they have been shaky over the last few months (like so many others), I believe that their potential will start to shine through more and more. With the economy still looking decidedly uncertain and everyone clamoring to buy gold RBY offers a low-cost way to get your toes in the pool with the excellent potential of providing you a large wave into a big return.
Add Rubicon Minerals to My Watchlist to see if it can finally realize all the potential its fellow miners and investors seem to hold out for it.
Are Incyte (NAS: INCY) investors really worried about the advances YM BioSciences has made with its JAK1 and JAK2 Inhibitor CYT387, a once-a-day treatment for myelofibrosis? Sure, the therapy is a once-a-day regimen compared to Incyte's twice-daily Jakafi program, but it's still in early stages of clinical trials while Jakafi is already on the market.
YM's stock may have received a boost from the "significant and durable responses" in ongoing phase 1 and phase 2 trials, but there's still a very long road before it ever gets to market. All too often, things can and do go wrong. Incyte also has in its favor Novartis (NYS: NVS) helping it market Jakafi outside the U.S. so it will have significant global advantages should CYT387 make it through the gauntlet.
It seems, therefore, that short sellers are counting on the pump YM got to wear off quickly as the drudgery of further clinical trials wears on. While the CAS community is generally supportive of YM's chances -- just two of the nearly three dozen All-Stars weighing in think it won't beat the Street -- I've marked it to underperform for the next year or so if only because I think the exuberance the market has shown will give way to a more sober assessment.
You can tell us on the YM BioSciences CAPS page or in the comments section below if you agree, then follow along by adding it to My Watchlist.
Don't sell yourself short
Share your views with the CAPS community: Squeeze 'em till it hurts, or short 'em till the sun don't shine?
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At the time this article was published Fool contributorRich Dupreyholds no position in any company mentioned.Click hereto see his holdings and a short bio.Motley Fool newsletter serviceshave recommended buying shares of Novartis. Try any of our Foolish newsletter servicesfree for 30 days. We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Motley Fool has adisclosure policy.
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