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 New York Stock Exchange with 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 Jul 29
Shares Short Jul 15
|Taseko Mines (NYS: TGB)||0.9||0.7||31.8%||0.5%||****|
|Golden Star Resources (NYS: GSS)||13.1||10.8||21.7%||5.1%||****|
|Pioneer Drilling (NYS: PDC)||3.8||3.4||13.5%||6.4%||****|
Source: 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 170,000-strong CAPS community offers just such a good place to start.
A patina of growth
For most investors who think about manias, they envision stocks inexorably rising to unsustainable levels. But mania can grip stocks heading in the opposite direction, too, sending them plunging to depths that are totally unwarranted. Copper just might be a case in point.
Being an industrial metal, it will generally reflect business conditions domestically as well as around the globe. But sometimes markets are blind to undercurrents at work, and that creates opportunity. Joy Global (NAS: JOYG) asserts that the metal has "the strongest fundamentals" as supply concerns grow because of production level declines, and that the spiraling problem of European finance undercuts what would otherwise be a bullish situation. In short, the world hasn't stopped needing copper.
That means Taseko Mines looks very cheap at around $3 a share. Last quarter, it said mineral reserves from its Gibraltar mine increased by 80%, adding 1.8 billion pounds of recoverable copper to its reserves making it well worth your own coin. The Fool's resources guru Christopher Barker finds Taseko one of the best copper values around.
CAPS member pchop123 likes what's happening: "great story about to unfold -- they are now going to begin drilling an [extremely] profitable mine based on the assay after the approval of the Canadian government and some good PR with the local Indian tribes."
Add Taseko to your watchlist and see if it ends up doing evil by having its fingers in every pie.
Still a golden opportunity
Consider all the problems Golden Star Resources has had at its Bogoso-Prestea Mine. Aside from a poor management team it had to replace, the mine ended up producing less-than-hoped-for recoveries, and just last month it had to downgrade the expected production levels to 39,000 ounces from the previous 43,000 ounce guidance it gave.
What might be missing from the short sellers' analysis, though, is its Pampe deposit, where it just restarted mining. With 191,000 ounces of proven reserves, the project -- when including the mine tailings -- will have cash operating costs of just $650 an ounce.
Shares of gold producers have significantly underperformed the price of gold itself this year. Golden Star is down 59% so far this year, Aurizon Mines is down 30%, and NovaGold Resources (NYS: NG) is down 53%. Shorts might be expecting continuing divergence from bullion and those that mine it. CAPS member bubbaskinz would disagree: "With a job standstill the market has dropped. Gold prices go up and the company is only a dollar off a year long low it should pick up later this year."
You can tell us on the Golden Star Resources CAPS page or in the comments section below if you agree, and then follow along by adding it to your watchlist.
Can't touch this!
Land drilling contractor Pioneer Drilling is another resources stock that has fallen on hard times recently, its stock getting cut in half from its 52-week high. Recent quarterly losses were worse than the year-ago period, but its operational performance was actually much better, and its results beat expectations.
The results were better primarily because more of its drilling rigs, workover rigs, and wireline fleets were in use. Workover rigs restore production to wells, while wireline equipment services them. Pioneer is in the middle of a turnaround that seeks to catch up to rivals Hercules Offshore (NAS: HERO) and Weatherford International (NYS: WFT) . A secondary offering this summer gave it the cash needed to expand its rig count, a move no doubt supported by the 96% of CAPS members rating the driller to outperform the broad market averages.
You can tell us on the Pioneer Drilling CAPS page or in the comments section below if you agree, and then follow its prospecting progress by adding it to the Fool's portfolio tracker.
Don't sell yourself short
It pays to start your own research on these stocks on Motley Fool CAPS. Read a company's financial reports, scrutinize key data and charts, and examine the comments your fellow investors have made all from a stock's CAPS page. Then share your views with the CAPS community: Squeeze 'em till it hurts, or short 'em till the sun don't shine? May the best argument prevail!
At the time this article was published Fool contributorRich Dupreyholds no position in any company mentioned. Check out hisholdings and a short bio. The Motley Fool owns shares of Joy Global.Motley Fool newsletter serviceshave recommended buying shares of Hercules Offshore. Try any of our Foolish newsletter servicesfree for 30 days. We Fools don't 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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