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 Nov. 15
Shares Short Oct. 31
CAPS Rating (out of 5)
|Northern Dynasty Minerals (NYS: NAK)||2.1||0.5||280.5%||2.9%||****|
|Denison Mines (NYS: DNN)||4.2||2.5||66.1%||1.3%||*****|
|Protalix BioTherapeutics (NYS: PLX)||3.8||2.7||41.9%||6.2%||**|
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.
A falling star
The Pebble project in southwestern Alaska that Northern Dynasty Minerals is developing with Anglo American is a gold mine of opportunity for investors as it is the largest undeveloped copper-gold-molybdenum deposit in the world, with the potential to produce as much as 53 billion pounds of copper, 50 million ounces of gold, and 2.8 billion pounds of molybdenum over nearly 80 years. Yet it's not without risk.
Despite the state being behind the project, there's a lot of local opposition, making it a different situation than when federal Canadian authorities denied Taseko Mines (NYS: TGB) a permit for its Prosperity mines (but even that's now moving forward again).
The problem is that Northern Dynasty doesn't have the resources to develop Pebble alone. Even though Anglo has committed to spending large sums to advance the project, the junior miner really needs a really big miner to step forward and take it over. It put its 50% stake on the market earlier this year in hopes of getting it bought out, but had no takers. Not even Rio Tinto (NYS: RIO) , which owns a 20% stake in Northern Dynasty, was apparently interested. Perhaps more of the legal hurdles need to be cleared out before someone is willing to step into the breach.
Although the uncertainty has weighed on the stock, the CAPS community still sees the potential, with 93% of the nearly 500 members rating the miner believing it will outperform the market indexes. Add Northern Dynasty Minerals to your watchlist to see if it can find a buyer or overcome the opposition.
Perhaps Rio Tinto has just been otherwise distracted by its attempt to steal Hathor Exploraton from uranium miner Cameco (NYS: CCJ) , which lost out in a bidding war for the world's largest undeveloped uranium deposit. Hathor previously rejected Cameco's original bid as too low, and dropped out of the race when it was outbid by Rio.
The battle highlights the continued importance of nuclear energy to the U.S., which has more nuclear power facilities than any other country in the world but has to import 90% of its uranium supplies. Domestic miners like Denison Mines, which has properties in Arizona, Colorado, Utah, and Canada, are thus sitting on gold mines of their own. Uranium pricing is well off the high it hit before the Japan disaster, and mining stocks are depressed as a result. Yet Denison might now prove attractive to Cameco, which still plans to double its uranium production to 40 million pounds annually by 2018.
That could be why 98% of the CAPS All-Stars weighing in on Denison still see it beating the Street going forward. You can tell us on the Denison Mines CAPS page or in the comments section below if you agree this is a turning point, and then follow along by adding it to your watchlist.
Can't touch this!
Like throwing horseshoes or lobbing grenades, short-sellers betting against Protalix BioSciences getting FDA approval for its treatment for Gaucher disease didn't have to hit their mark, just come close enough.
The regulatory agency didn't reject taliglucerase alfa, but rather only extended its goal date for approving it by three months to May 1 of next year. That was good enough for Protalix to take shrapnel, as its shares sold down more than 20%. The FDA keeps asking for more data from Protalix and marketing partner Pfizer (NYS: PFE) , and seems concerned about the bioscience specialist's novel manufacturing process.
CAPS member StockTraderG thinks that as the PDUFA deadline nears, you'll see Protalix shares start to rise again, but in the meantime he expects them to drop further.
The FDA just delayed PLX's PDUFA date today by 5 months. Stock crashed down 20% this morning and is now only down 11% on the day. I predict a slow trickle sell-off to start in the coming days, and continue until PLX begins next years PDUFA runnup
You can tell us on the Protalix BioSciences 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.Click hereto see his holdings and a short bio.Motley Fool newsletter serviceshave recommended buying shares of Pfizer. 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.
Copyright © 1995 - 2011 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.