James Dennin, Kapitall: Some analysts think the 2013 bull market created lots of opportunities for short selling. What do you think?
Short selling is the sometimes controversial practice (depending on
you are) that involves selling another person's stock shares, and then buying them back at a cheaper price if the stock's value goes down. Since you only need to return the borrowed shares, you get to pocket the difference.
But of course, there are many hitches.
For one, short selling can generate lots of negative speculation about a company that may not be warranted. Dick Fuld blamed short selling for the Lehman Brothers crash in 2008 (although sub-prime mortgages probably didn't help…)
They can also be hard to play. For instance, if you hold the earnings from borrowed shares too long, pressure can start to mount if the price goes up even a little bit, leading investors to cover at a loss.
[Read more from Kapitall on Short Selling: Using the Short Ratio to Forecast Turning Points]
If a lot of people experience this pressure at once, it can create a short-squeeze, where the value of the shares skyrocket as lots of people try to cover their positions at the same time, driving up demand in a spiral effect.
We decided to see which stocks experienced the most short selling in the second half of December (the most recent data available in
Wall Street Journal's
Short Interest Database
). Do the results merit further investigation? Or are they being short sold for a reason?
Click on the interactive chart below to view data over time.
Is the market wrong about these six short-sold stocks? Use the list below to begin your analysis.
1. V.F. Corporation
): Designs and manufactures, or sources from independent contractors various apparel and footwear products primarily in the United States and Europe. Market cap at $26.00B, most recent closing price at $58.78.
Shorted shares grew by 8,502,317 in the last half of December 2013, an increase of 478.2%.