This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

CCME: The Biggest Short Squeeze of 2011

The following article is from a contributing writer at TheStreet. The views expressed, including any positions taken on securities, are independent of TheStreet's news coverage.

NEW YORK (TheStreet) -- We are about to see the largest short squeeze of my lifetime. The current short position? Roughly $125 million has been sold short on a company that is trading around $1 billion; that analysts project to make $140 million in fiscal year 2011; that grew revenues more than 100% last year.

Usually, shorts try to make money when stocks go down basing their short position on the company being overvalued. Unfortunately, when the underlying company is worth several multiples of where it is currently trading and adding to the short position only inspires and enables more buying, not less -- you have the makings of an epic short squeeze. So, what are the shorts betting on? They are betting that China MediaExpress Holdings (CCME) is a fraud.

Is it a fraud?

1. CCME has been fully vetted by Starr International -- headed by Hank Greenberg -- 4 months. Also on the board of directors and checks monthly numbers.
2. CCME has been independently vetted by Global Hunter -- 3 months.
3. CCME has a top four auditor, Deloitte.
4. It is #1 on the Forbes China List of Small-to-Medium Sized Companies with the Greatest Potential.
5. Its Zack's Rank is #1.
6. Investors Business Daily gives CCME top marks, best marks out there actually.
7. Its CFO is a former auditor of Price Waterhouse Coopers, who just bought $1.5 million of stock.
8. Dividend policy starting in the next 90 days.
9. Signed contracts with Apple (AAPL), Nike (NKE), Sony (SNE), Adidas, Toshiba, etc.
10. Independent investors have visited the company and not found indication of fraud.
11. Mike Koza, who has averaged 33% a year for almost 10 years, owns CCME.

Is it a good deal?

1. Fully Diluted Market Capitalization of $1 billion.
2. Last year, revenues grew more than 100%.
3. Projected to make $140 million FY2011.
4. Routinely conservative/beatable guidance.

What about the shorts?

1. The shorts are now naked shorting as evidenced by RegSho.
2. The quantity of shorts over the last six months has gone from around 1 million to more than 6 million, an increase of 600%. Meanwhile, the stock has gone from around $10 to $20. So, I am assuming that on average, they are underwater.

Technical Analysis?

Bullish TA: Cup and Handle

Lastly, I want to talk about how the mind of an investor works. When a stock trades in your direction, you feel good about it and don't think much about it. When a stock trades against you, however, you tend to re-evaluate your investment hypothesis and consider changing your mind.

My perspective is the following. If CCME goes to $25 and you have 6 million shares short that are all underwater -- are the shorts going to short more when there are no more shares available to short? Or are they going to reconsider their investment hypothesis?

At the time of publication, Bradford was long CCME.

RELATED STORIES:


Become a fan of TheStreet on Facebook.

This commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program. The views expressed are those of the author and do not necessarily represent the views of TheStreet or its management.

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 17,039.49 +60.36 0.36%
S&P 500 1,992.37 +5.86 0.30%
NASDAQ 4,532.1040 +5.6220 0.12%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs