Bears make money much faster than bulls. That’s because markets take much longer to rise than to fall. Remember, pushing up markets requires capital; on the other hand markets can fall under their own weight.
That said, shorting is a much more risky game than going long. That’s because the risk on a short gone wrong is unlimited, while the most you can lose on your long play is the entire value of your investment, assuming the stock flames down to zero.
Given the torrid pace US stocks have set this year, short-sellers could be an endangered species, one would think. Not so – though bears may have been on the back foot this year, they were very much alive and kicking judging from this analysis of the best short deals seen in 2013 from The Tell, a market news and analysis blog that relied on data from Markit.
Gold miners
Companies such as Allied Nevada Gold Corp. (NYSEMKT:ANV) and Kirkland Lake Gold Inc. (LON:KGI) were short targets after the price of the yellow metal hit the skids this year. Allied Nevada lost 88% and Kirkland was down 59% this year.
Biopharmaceuticals
Bears benefited from their shorts on Ariad Pharmaceuticals, Inc. (NASDAQ:ARIA) which plunged 76% after the Fed blocked the company’s leukemia treatment. Vical Incorporated (NASDAQ:VICL) paid the price for regulatory problems in connection with trials of its melanoma drug – its stock fell 63%.
J.C. Penney Company drops
ORBITE ALUMINAE (OTCMKTS:EORBF) raked it in for short sellers when it fell 84% during the year. Angie’s List Inc is down 47% after declaring disappointing results in October.
J.C. Penney Company, Inc. (NYSE:JCP) is down 13% on an average basis considering the fluctuations in its price.
Aside from the insights we received from the Markit analysis above, what are shorters doing now?
Major shorts as a percentage of float
We used data from the WSJ to identify short positions that were higher than 30% of the company’s aggregate float as on November 15, 2013. We then looked at only those that had gone up by double digits in percentage terms, and tracked the likely trigger for those shorts.
Here’s what we came up with:
| Company | Symbol | 11/15/13 | 10/31/13 | Change | % Change | % Float | Days to cover | Average daily volume | Trigger | Link |
| Molycorp Inc (NYSE:MCP) | MCP |
6,05,20,271 |
5,04,57,609 |
1,00,62,662 |
19.9 |
33.8 |
9 |
67,11,250 |
Largest known rare earth mineral deposit discovered | http://www.pcreml.com/assets/pool/documents/SRE%20announcement%204Dec2013.pdf |
| Millennial Media, Inc. (NYSE:MM) | MM |
1,03,60,055 |
89,13,963 |
14,46,092 |
16.2 |
35.5 |
4 |
27,26,918 |
Profit misses after higher payments to ad partners | http://www.reuters.com/article/2013/11/13/us-millenialmedia-results-idUSBRE9AC1AQ20131113 |
| J.C. Penney Company, Inc. (NYSE:JCP) | JCP |
9,12,40,768 |
7,90,47,619 |
1,21,93,149 |
15.4 |
30.3 |
3 |
3,48,95,568 |
Kyle Bass Says He’s Dumped His J.C. Penney Stake And The Stock’s Taking A Beating | http://www.businessinsider.in/Kyle-Bass-Says-Hes-Dumped-His-JC-Penney-Stake-And-The-Stocks-Taking-A-Beating/articleshow/26920283.cms |
| Received a letter of inquiry from the SEC on Oct. 7 regarding its “liquidity, cash position, and debt and equity financing,” as well as its recent stock offering. | http://www.sec.gov/Archives/edgar/data/1166126/000116612613000100/jcp-11022013x10q.htm | |||||||||
| Aeropostale Inc (NYSE:ARO) | ARO |
2,18,32,538 |
1,97,55,400 |
20,77,138 |
10.5 |
30.7 |
8 |
26,31,444 |
Misses by $0.05 EPS, misses on revenue | http://seekingalpha.com/news-article/8368181-aeropostale-reports-results-for-third-quarter-of-fiscal-2013 |
Keep your eye on these companies, for they are in bear territory.
