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Investors are betting against large-cap oil and natural gas exploration and production company
Pioneer Natural Resources(PXD - Get Report). The firm's short interest ratio of 13.4 indicates that it would take around three weeks of buying pressure for short sellers to cover their positions in the stock at current volume levels. With reserves standing at 1.1 billion barrels of oil equivalent, this stock should have more staying power than shorts are counting on.
Pioneer is an experienced E&P with some attractive positioning right now. The firm boasts a reserve mix that's skewed towards liquids, which means that more of what the firm pulls out of the ground falls on the more lucrative side of the spectrum. Even though oil and gas prices have languished for the last few months, they're consolidating on the higher end of their historic range, a fact that's kept Pioneer's net margins high. In an environment where more and more integrated oil and gas names are shedding their downstream assets, the fact that PXD is already a pure play E&P should be seen as a big plus.
Even though the oil business is capital intense, Pioneer is also in good financial shape, with a hefty cash reserve on hand and a manageable debt load on its balance sheet. Perhaps more importantly, the firm's relatively low overhead costs mean that PXD can afford to operate on a shoestring budget and wait out inevitably higher oil costs down the road. Once oil starts climbing, we'll see how long short sellers can hold out.
Stanley Black & DeckerStanley Black & Decker(SWK - Get Report) has gone through some big changes in the past few years. The toolmaker weathered the Great Recession, an economic environment that punished companies with construction exposure worse than most. And it dramatically ballooned in size in 2010 when Stanley and Black & Decker merged to form the company as it stands today.
But short sellers aren't impressed right now. A short interest ratio of 11.9 means that it would take more than two weeks of buying for shorts to exit their stakes.
Even though SWK is best known for its retail tool line, the firm has been working hard to take a more industrial posture, selling off its hardware and home improvement business and acquiring an industrial fastener firm for $850 million. Long-term, that strategy makes a lot of sense since it divorces SWK from one of the more volatile business lines represented on its income statement, and gives it a chance to pare down its leverage at the same time.
As the North American construction and DIY market slowly warms back up, international growth is going to be a key growth avenue to target for SWK. Only around 15% of the firm's sales come from non-OECD countries, and growing demand for building equipment in the emerging markets makes them particularly attractive to SWK. Next week's earnings call could be a big catalyst for shorts to run from this stock.
To see this week's short squeezes in action, check out the of
Large-Cap Short Squeezes portfolio on Stockpickr.
-- Written by Jonas Elmerraji in Baltimore.