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 with 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 Jul 29
Shares Short Jul 15
|Powerwave Technologies (NAS: PWAV)||13.7||8.6||58.2%||8.1%||***|
|News Corp (NYS: NWS)||32.9||23.6||39.0%||NM||**|
|Horsehead Holding (NAS: ZINC)||3.4||2.6||31.3%||7.7%||*****|
Sources: wsj.com. Share counts in millions. NM = not meaningful.
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 170,000-strong CAPS community offers just such a good place to start.
The short list
Unfortunately for Powerwave Technologies, wireless networking equipment doesn't carry the same cachet as the patents in the business do. Otherwise, it might find itself with a multibillion-dollar bid from a wireless operator.
As it is, Powerwave will need to content itself with selling base stations and antennas and supporting equipment. But if second-quarter earnings results are any indication, business should be picking up soon enough, even if the overall results were a bit of a disappointment.
Powerwave depends heavily on a joint venture between Nokia (NYS: NOK) and Siemens, which accounted for 28% of its revenue in the quarter. While Nokia Siemens Networks had toyed with the idea of selling itself to private equity, it's shelved the proposal, and it's moving forward with plans to increase its footprint.
Nokia Siemens recently bought the infrastructure assets of Motorola Solutions (NYS: MSI) for $975 million, which will give it a larger LTE and WiMAX presence here in the U.S., in addition to equpment employing the CDMA standards used by Verizon and Sprint (NYS: S) . Currently, NSN is heavily invested in the GSM equipment used everywhere else in the world.
Roughly 86% of the CAPS All-Stars who've rated Powerwave believe it will power ahead against the broad market averages. It's clear they expect the wireless equipment maker to change direction. Network with other investors on the Powerwave Technologies CAPS page, and let us know whether the company will connect with more growth.
Read all about it!
The phone-hacking scandal that's embroiled News Corp is bad enough -- and no doubt the reason behind short sellers' decision to pile into the stock. But the news just got worse for the media conglomerate, now that Google's (NAS: GOOG) decision to spend $12.5 billion on a big wireless telecom bet means it probably won't want to buy Hulu, the online video service News Corp. co-owns. More than one analyst pegged Google as a good candidate to scoop up the site.
Investors shouldn't expect the risk associated with the hacking scandal to dissipate soon, either. While some such tempests blow over quickly, new revelations continue to deepen News Corp.'s involvement in this already dismal situation. The latest blow: A just-published letter from former News of the World correspondent Clive Goodman, revealing that many executives were fully aware of the hacking, years before they said they were.
CAPS member ericrandalls pegs the scandal as the biggest risk confronting the media empire, while Eudemonic admonishes the Wall Street Journal for agreeing to be sold to the tabloid publisher several years ago:
Current phone hacking scandal won't help this stock for the short term. Message to Wall Street Journal: Your readers told you selling yourself to Murdoch wasn't a wise move. Now, you understand.
Add News Corp to your watchlist if you want to read more about its progress, but make the News Corp CAPS page a real page-turner by adding your opinion about its future.
An offer you can't refuse
Short sellers are undoubtedly focusing on the dilutive aspects of Horsehead Holdings' recently announced $80 million share offering to finance a new zinc mining facility than on the new business it can potentially generate. That could be because the six Horsehead plants currently in operation aren't working flawlessly, and its steel industry is running at just 70% of its capacity.
Horsehead said that while it expects the steel mills to rise above those levels, production will remain depressed. It also had problems at one of its plants last quarter that will likely hurt third-quarter shipments. So while zinc prices have been higher, there seem to be few catalysts present to boost the stock higher. CAPS member DargFool dares to take a contrarian view:
Undervalued over fear of global recession. New technology investment in lower production cost and higher capacity equipment that also allows recycling of other metals from EAF dust (copper, etc.) which also lowers their reliance on the price of zinc. Good synergy from their INMETCO purchase.
Add the zinc miner to your watchlist to keep track of its production progress, and have all our news and analysis on the company gathered together for you in one place.
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 The Motley Fool owns shares of Horsehead Holding and Google. Motley Fool newsletter services have recommended buying shares of Google and Horsehead Holding. Try any of our Foolish newsletter services free for 30 days. We Fools may not 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.Fool contributor Rich Duprey owns shares of Motorola Solutions but does not have a financial position in any of the other stocks mention in this article. You can see his holdings here. The Motley Fool has a disclosure policy.
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