It's earnings season, which means lots of stocks will be making big moves. Most of the time, we can't see those big moves coming -- unless, of course, we have illegal inside information.
But for three stocks in the S&P 500 , big moves are highly likely in the coming week. The reason we know this: All three are heavily shorted -- or have lots of investors betting against them. Though it's impossible to predict their direction, big moves usually go hand-in-hand with earnings announcements from such companies.
Have doubts? Just last week, I identified five such stocks, and they averaged moves of more than 10% just after earnings. For the coming week, these are the three stocks investors should keep their eyes on.
% Shares Short
Expected Revenue (in Millions)
Sources: finviz.com, Yahoo! Finance, E*Trade.
It should be noted that Sprint and U.S. Steel are announcing earnings before the market opens; First Solar will be doing so after the market closes. Huge moves from First Solar, therefore, should be expected during Tuesday's trading session.
In 2011 and 2012, owning shares of this solar module and photovalic cell manufacturer was a losing proposition. The company's stock plunged 75% during that time. This year, however, has been much kinder, as shares are up more than 75%. That movement hasn't kept the shorts away, though.
As the price of photovalic cells has fallen over the past five years, manufacturers such as First Solar have felt the pinch. But improvement in the efficiency of the company's cells has helped it differentiate from the competition -- which has been important, as demand has picked up this year. That, combined with the fact that the company is helping build a solar power plant in California, has given investors lots of hope.
Bears are counting on the fact that photovalic cells will eventually become commodity items, with all roughly having the same efficiency. Only time can tell whether that pans out to be true.
Almost every quarter since I started calling out big movers, U.S. Steel has been on the list. It's no secret that demand for steel, and prices for the commodity, have been low lately. It's also no secret that the entire industry is closely tied to the fate of China, which needs steel to build out its infrastructure.
Bears are taking not only the sky-high overhead costs into consideration when they short the company, but also the very real possibility that any slowdown in growth from China could be a huge blow for U.S. Steel. That being said, bullish investors are counting on new CEO Mario Longhi's long-term cost-cutting measures to return the company to sustainable profitability.
Finally, we have Sprint. Fools need to remember that back in 2012, Japanese-run Softbank announced that it would acquire a significant portion of Sprint's shares. Currently, that stake accounts for 80% of Sprint's shares. That means it's much easier for Sprint to have a high percentage of shares sold short, as there are far fewer shares available than there were a few years ago.
Bullish investors are hoping that the backing of Softbank and the requisite influx of cash that comes with it will help the company once again be a dominant force in North America. The shorts are counting on having the company continue to perform as poorly as it has in the past. They may have a point, as Sprint doesn't offer a dividend -- a mortal sin for a big telecommunications company -- and is currently unprofitable.
This is a marathon, not a sprint
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The article 3 S&P 500 Stocks Set for Big Moves This Week originally appeared on Fool.com.
Fool contributor Brian Stoffel and The Motley Fool have no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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