5 Stocks That Will Make Big Moves Tomorrow
You will always find us Fools preaching the virtues of buy-to-hold investing. But we're a motley bunch, and we have a little bit of something for everyone. If you get a rush from the wild swings that sometimes surface in the stock market, this article is for you.
These stocks are heavily shorted, which means people are betting they'll go down. When significant news arises, these stocks can make major moves -- either up or down -- based on whether the shorts are right. If the shorts are correct, a stock could plunge. If they're wrong, we could see the creation of an epic short squeeze.
I've identified heavily shorted stocks before, and sure enough, they've made some pretty big moves. For example, when I did this experiment back in April, the average stock I highlighted changed price by an average of 10.4%.
Here are Monday's five stocks to be aware of:
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This regional bank, headquartered in Mississippi, is your traditional small- to medium-size commercial bank. Even though 9% of shares sold short isn't an astronomical number, one has to wonder: Why would so many people bet against a small regional bank?
Part of it might be that shares are already up 45% this year, more than doubling the market's return in the same time frame. Much of that gain came after the company announced second-quarter earnings and revealed that it was successfully offering up early retirement buyouts to control long-term costs.
But the other part could be because income from mortgage loans has soared, and those could take a hit when quantitative easing ends and interest rates rise.
In late June, LINN, an oil and natural gas company with property rights throughout North America's shale plays, took an enormous hit, seeing shares dip by almost 20% when the company announced that the SEC was investigating it based on questionable accounting strategies.
Since then, the shorts have been covering their positions, which is why only 5% of shares are being sold short right now, the lowest of any company on this list. Investors are likely to pay close attention to any answers on the conference call regarding the SEC investigation, as well as comments on the company's move into the Mississippi Lime formation.
Anyone who follows investing knows what a roller-coaster ride it's been for Netflix investors. First there was a ride up to $300 in 2011, followed by the nightmare of Qwikster and the botched messaging of rate increases, which sent shares down more than 80%.
But 2013 has been a different story, as shares have risen almost 250%. Investors are banking heavily on two things: the continued successful expansion of Netflix worldwide, and the ability to retain and grow customers in existing markets because of original and rerun content. With shares trading at 400 times earnings, any missteps will have significant short-term consequences.
Yup, that's right: RadioShack is actually still around. It suffered mightily following the Great Recession, and the showrooming phenomenon hasn't helped, in which people use the store to check out the physical products, only to buy them later on Amazon.com.
But shareholders have happily seen their lot improve dramatically in 2013, with shares up more than 60% on the year. A leaner company, combined with a new concept store designs, has investors excited, but the shorts aren't buying it, as more than one-third of shares are sold short. Count me among the non-believers.
Finally, we have VMWare, a company that specializes in cloud infrastructure products. It's been an up-and-down year for shareholders, enduring a 21% drop in January on disappointing guidance, only to be followed by an 18% pop in late July, when the company exceeded earnings expectations.
The key to understanding these moves is that it's been difficult for Wall Street to tell whether VMWare's licensing revenues are stalling or not. Priced at 44 times earnings, if those revenues come in under the expected $545 million, shares could experience more hard times.
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The article 5 Stocks That Will Make Big Moves Tomorrow originally appeared on Fool.com.Fool contributor Brian Stoffel owns shares of Amazon.com. The Motley Fool recommends and owns shares of Amazon.com, Netflix, and VMware. 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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