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 profits.
These top companies on the American Stock Exchange had some of 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.
CAPS Rating (out of 5)
North American Palladium (ASE: PAL)
|Cheniere Energy (ASE: LNG)|
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, and our 180,000-strong CAPS community offers just such a good place to start.
Enter the Thunderdome
With deposits of copper, nickel, and platinum metals group minerals at its principal mine, the Lac des Iles property near Thunder Bay, Ontario, North American Palladium is Canada's largest palladium miner. In hopes of increasing its underground mining rate, NAP is expanding exploration at Lac des Iles, which consists of a depleted open pit, an operating underground mine, and a large, underused mill with a nominal capacity of about 15,000 tonnes per day.
Let's hope it works, because after putting to bed its Sleeping Giant mine because it couldn't operate economically, let alone profitably, NAP can only count on its Vezza gold mine.
Results from infill drilling at Lac des Iles are encouraging, with NAP reporting "excellent" grades being returned, as well as "bonanza"-grade surface mineralization. With modest palladium production expected this year followed by reductions in cash costs in 2013, NAP ought to be able to grow out of its current doldrums. The stock is up 11% year-to-date, but it's more than 60% below its 52-week high.
With the primary market for palladium being the auto industry (followed in a distant second by electronics), an investment in NAP is one that hopes for continued improvement in Ford (NYS: F) and GM, and CAPS member spinjr doesn't see any long-term worries at the moment, as NAP is financially sound.
Let us know on the North American Palladium CAPS page what you think the probability of a full auto industry recovery is, and add the stock to the Fool's free portfolio tracker to be notified if it puts any other assets to sleep.
I'll take that bet
That $2 billion bet by Blackstone Group had to hurt the short-sellers. Analysts doubted Cheniere Energy's ability to get financing for Cheniere Energy Partners' Sabine Pass liquefaction facility in Louisiana to export liquid natural gas, or LNG, so the shorts were undoubtedly hoping a failure on its part to find a backer coupled with some hefty debt payments coming due would sink the stock. Instead, it's soaring ahead.
Cheniere has been ahead of the market when it comes to LNG. With the market awash in dry gas, industry players Ultra Petroleum (NYS: UPL) and EnCana (NYS: ECA) are quickly moving to liquids that carry better margins. Reuters says supply constraints this year will keep LNG prices high in Asian markets, where demand is particularly acute.
CAPS member kennardsmith finds Cheniere's export plans a fortuitous development for the LNG producer.
LNG will outperform the S&P 500 due to the fact that the president has just approved a bill allowing for exportation of natural gas from the US. This company has just sign huge contracts that will export natural to other countries. It looks like LNG will control the majority of the exportation of natural gas from the US.
Add Cheniere to the Fool's free portfolio tracker and let us know in the comments section below if this amounts to a new lease on life.
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 Dupreyowns shares of North American Palladium, but he holds no other position in any company mentioned.Click hereto see his holdings and a short bio. The Motley Fool owns shares of Ultra Petroleum and Ford.Motley Fool newsletter serviceshave recommended buying shares of General Motors, Ultra Petroleum, and Ford, as well as creating a synthetic long position in Ford. 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.