In the past year, the price of crude oil has ranged from roughly $50 to $80 a barrel. Whenever the price of oil spikes upward, oil companies tend to move in sync. Of course, whenever stock prices move up, the short-sellers get squeezed -- and that tends to move the stocks even higher as the short-sellers buy their shares back.
At Stockpickr, we keep track of the
, the 15 oil companies that, because of their high short interests, are most likely to see a short squeeze if their stocks rise.
There are a lot of oil companies that have a significant short interest, especially the independent oil producers. The primary way of measuring how significantly a stock is shorted is by looking at its short ratio, also known as the days-to-cover ratio. This represents the number of days it would take the short-sellers to cover their positions based on the average daily volume.
A second way of measuring how extensively a stock has been shorted is by the percentage of the float that is short. Let me make one thing clear: Most short-sellers lose money -- a lot of it. So we might as well profit from it, particularly if the company's a good one that's about to get squeezed.
When an oil stock gets squeezed, it goes up in a parabolic manner -- think
, a biotech stock that got squeezed several weeks ago.
At the top of the Short Squeeze Oil Stocks list is
, with a short ratio of 14.2% and 7.8% of the float shorted.
The stock, which offers a forward price-to-earnings ratio of 29, is a holding of
, an activist hedge fund founded by Daniel Loeb with an average annual return of 28.9%.
There isn't a scenario much better than this, when you have insiders of a company backing up the truck -- loading up, in Cramer-speak -- on their own stock
you have short-sellers, who are destined to lose money, actually betting against the insiders.
The oil stock with the highest percentage of float shares short is
, with an extremely high 42.9% of shares short. But considering its extremely high forward P/E of 175, that short bet is perhaps understandable. The stock's short ratio is 9.6.
Goodrich is a holding in the portfolio of
, a multistrategy hedge fund founded by John Succo in 2001. Goodrich also appears in
, a list of stocks with large insider purchases mentioned in the weekly publication's April 30 edition.
Two more heavily shorted oil stocks include
. Forest Oil has a short interest ratio of 10.6, with 16.9% of the float shorted. Stone Energy's short interest ratio is 8.4, and its percent of float short is 8.3%.
has named Forest Oil as a one of several
For details on all 15 names, check out the
portfolio on Stockpickr.com. And for other stocks in a similar situation, check out our
, a more general list that is updated monthly.
At the time of publication, Altucher and/or his fund had no positions in stocks mentioned, although positions may change at any time.
James Altucher is president of Stockpickr LLC, a wholly owned subsidiary of TheStreet.com and part of its network of Web properties, and a managing partner at Formula Capital, an alternative asset management firm that runs several quantitative-based hedge funds as well as a fund of hedge funds. He is also the author of
Trade Like a Hedge Fund
Trade Like Warren Buffett
. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Altucher appreciates your feedback;
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