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 Amex 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)
TransAtlantic Petroleum (ASE: TAT)
|Rentech (ASE: RTK)||7.0||6.1||14.6%||3.2%||**|
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.
Time to gas up?
It's well known that the natural gas industry in the U.S. is hurting because of plentiful supplies and depressed prices. A surprise upturn in the number of rigs drilling for gas does nothing to clear the wreckage on the natural gas highway. Yet the U.S. market and those in foreign countries don't walk lockstep, and as difficult as producers like Southwestern Energy and Apache may have it at the moment, that doesn't extend to TransAtlantic Petroleum, which drills for oil and gas in off-the-beaten-path locations, and may end up surprising the shorts attacking the stock.
TransAtlantic holds interests in oil and gas properties in Turkey, Bulgaria, and Romania, having shed Moroccan operations last year, and it will be spending 65% of its 2012 capital spending program on its Thrace Basin holdings in Turkey, where natural gas is the primary target and prices are on the rise.
In an effort to stem losses at the government-run pipeline company Boru Hatlari Ile Petrol Tasima, the Turkish government hiked natural gas prices 18.7% on April 1 and is looking to yank them higher still by another 15%. In 2011, TransAtlantic enjoyed natural gas prices of more than $7 per Mcf when U.S. prices were lucky to be around $4 per Mcf. Now Turkey is raising prices higher and the U.S. is seeing nat gas prices tumble to around $2.15.
I agree with CAPS member RAP7777 that the oil and gas producer's Turkish strategy will eventually pay off, and I've rated it to outperform the market indexes. Add TransAtlantic Petroleum to the Fool's free portfolio tracker to stay on top of the divergence in U.S. and foreign natural gas markets.
Enough to raise your blood pressure
President Obama insisted recently that algae-based fuels can reduce our dependence on foreign sources of fossil fuels by replacing some 17% of U.S. oil imports. Perhaps, as long as we don't mind paying a lot more for it than we do for traditional sources of fuel. To buy 450,000 gallons of experimental jet fuel from Solazyme (NAS: SZYM) , the Navy paid $16 a gallon for gas when standard marine fuel goes for around $4 a gallon, and MIT found that even under optimal conditions, algae-based fuel would still go for around twice the price of conventional fuel. A study from the University of Virginia found that algae-based fuels require more land to develop, generate more greenhouse gases, and lead to greater environmental degradation than other types of biofuels.
Meanwhile, alt fuel specialist Rentech has also been pushing biomass fuels, but it got whacked a year ago when the Energy Department didn't provide funding for a proposed biomass gasifier plant. Rentech got a bunch of cash from its Rentech Nitrogen Partners spinoff, so it won't run out of money any time soon, but that doesn't mean investors should put their own cash to work here.
While I agree with CAPS All-Star TMFDeej that Rentech's synfuel business should be discarded, I disagree that it will beat the Street even with the addition of nitrogen. I've rated Rentech to underperform the markets, but you can add your own thoughts on the Rentech CAPS page or in the comments section below, and add its stock to your Watchlist if you believe as I do that Rentech will end up stinking worse than rotting pond scum.
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. The Motley Fool owns shares of Solazyme. The Motley Fool has adisclosure policy. We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. Try any of our Foolish newsletter servicesfree for 30 days.
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