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 Nasdaq 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, Nov. 15
Shares Short, Oct. 31
|DISH Network (NAS: DISH)||5.3||2.4||125.4%||2.6%||**|
|Novavax (NAS: NVAX)||10.8||5.9||84.5%||10.8%||*|
|Amylin Pharmaceuticals (NAS: AMLN)||9.1||6.1||48.6%||6.3%||***|
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 180,000-strong CAPS community offers just such a good place to start.
A falling star
Will paying off shareholders translate into a good growth story, or does it just delay the day of reckoning? DISH Network reported disappointing results earlier this month, but it was able to mollify investors with a $2-per-share special dividend to quell the notion that the satellite-TV provider would go off on a tangent and build out the wireless broadband network it's been slowly developing.
The worry is not without good reason. Earlier this year, DISH moved to acquire for $1.4 billion DBSD North America, which is developing a hybrid satellite and terrestrial communications system capable of supporting wireless voice, data, and Internet services. It was willing to pay another $1.4 billion for assets belonging to bankrupt TerreStar Networks to help further the project.
The idea would allow DISH to compete against the 4G networks of Verizon (NYS: VZ) and AT&T (NYS: T) by providing broadband service to areas not typically available to their terrestrial systems. So it's not that the plan is not going forward, just that shareholders won't be pushed aside as profits and subscribers fall as they did this past quarter.
With 80% of the 390 CAPS members rating the satellite-TV provider to outperform the broad market averages, it seems they're willing to give DISH the benefit of the doubt, but its low two-star rating also suggests that they believe there are better places for your money. Add DISH Network to your watchlist and see whether it can undermine the bear case against it.
There could be a U-turn ahead for Novavax, as the federal flu vaccine contract it won earlier this year has it searching out new digs to work in.
The contract for $97 million over three years might be extended for an additional two years, which would be worth another $82 million, so Novavax is moving into a new, larger facility that will allow it to double its production capabilities.
Unlike Novartis, GlaxoSmithKline (NYS: GSK) , and Sanofi, which typically produce their vaccines in chicken eggs, Novavax uses its virus-like particle technology to genetically mimic viruses and other pathogens. In the event of a pandemic outbreak, the biopharma's vaccines could be manufactured more quickly than egg-based vaccines.
Following those mixed quarterly results, analysts raised their near-term estimates and expect it to lose $0.05 a share, compared with $0.06 a year ago. That's a narrower projected loss than the $0.07 a share they were expecting just last month. CAPS All-Stars, while leaning in favor of seeing Novavax pull it out, still have some hesitation, as 45% of those rating the biopharma think it will underperform the market.
You can tell us on the Novavax CAPS page or in the comments section below if you agree that this is a turning point, and then follow along by adding it to your watchlist.
Can't touch this!
Now that the legal wrangling between Amylin Pharmaceuticals and Eli Lilly (NYS: LLY) is behind them, and the former will regain the rights to transform once-a-day diabetes treatment Byetta into once-weekly Bydureon, Amylin is now looking forward to another FDA decision in January. The failure to get the regulatory agency's nod before is what sent Lilly into the arms of German drugmaker Boehringer Ingelheim in the first place, and now they'll be selling a competing diabetes drug.
Short sellers obviously aren't thinking very highly of Amylin's chances these days -- or, if approved, of being able to go toe-to-toe with larger, better-financed rivals. Still, 88% of the nearly 450 CAPS members rating Amylin think it will still go on to outperform the broad market indexes. You can tell us on the Amylin Pharmaceuticals CAPS page or in the comments section below if you agree, and then see what happens 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.Motley Fool newsletter serviceshave recommended buying shares of Novartis and GlaxoSmithKline. 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.