Security and automation firm ADT (ADT - Get Report) is one name that's actually panned out for shorts in the last year. Shares have dropped 20% in the trailing 12 months, lagging the broad market's performance by a wide margin. But as ADT gets used to its status as a standalone company, it's giving shorts a reason to cover and take gains while they can.
Right now, ADT has a short interest ratio of 13.56. That's almost three straight weeks of buying pressure if short sellers need to cover quickly.
ADT provides burglary, fire and carbon monoxide monitoring as well as home automation services for more than 6.4 million customers in the U.S. and Canada. That's good enough to make up a full 25% of the residential and small business security market. Because ADT's customers sign lucrative, relatively long-term contracts to add ADT's services, multi-year retention rates are extremely high. And because customers go to the trouble (and expense) of installing ADT hardware on their premises, switching costs are even higher.
The addition of the Pulse platform adds value for customers who have ADT system installed. The product enables features such as automation that integrate directly with ADT's security infrastructure. Better, it provides a lucrative stream of added services that it can market to its huge rolodex of customers.
According to our model, this heavily shorted $7.6 billion name has squeeze potential this month.
To see these short squeezes in action, check out this week's Short Squeezes portfolio on Stockpickr.
-- Written by Jonas Elmerraji in Baltimore.