South Carolina-based electric and gas utility, SCANA Corporation (SCG), serves power and natural gas to around 1.5 million customers spread across three Southern states. Typically, regulated utilities are beloved by the most risk-averse investors, but not SCANA; the $6.1 billion firm currently has a short interest ratio of 13.27.
SCANA isn't just involved in distribution -- it's a major non-regulated infrastructure owner, with a big power generation arm, transmission assets and a fiber optic communication network. Vertical integration gives the firm net margins that weigh in the double digits; a healthy balance sheet gives SCG access to enough dry powder that it can handle a few economic potholes in the next couple of years. Exposure to high-margin nuclear energy gives SCG some big profitability advantages, especially as the firm works on building new nuclear plants in South Carolina.
For a utility stock, the dividend is everything -- and for shorts, the most common downside scenario comes from the possibility of a dividend cut. While SCANA's payout is hefty at 4.3%, the firm generates enough cash to cover its obligations for the foreseeable future.Dick's Sporting Goods Sporting goods retailer Dick's Sporting Goods (DKS) has managed a slam-dunk this year -- shares of the $6.2 billion firm have rallied 38% since January. But anxious investors have been taking the other side of the DKS trade all along the way -- the firm's short-interest ratio currently stands at 10.14. Dick's is the league leader in the sporting goods business, with around 500 big box stores spread throughout the U.S. and another 81 Golf Galaxy locations under its belt. Because of its size, DKS can negotiate favorable contracts with suppliers that typically have the pricing power in the relationship. It also means that the firm can reap major supply-chain benefits and absorb costs across its entire store network, making merchandising improvements that much more attractive. Even though Dick's is the biggest game in town, however, there's still enough room for this chain to expand at this point. With a product mix that leans on the higher-end, Dick's has built in enough big-margin offerings to generate margins that other retailers can't easily pull off. As the firm increases its private label offerings in its stores, those margins should keep growing.
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