6 Companies Facing Heavy Short-Selling

Investors betting against the prospects of a company will short-sell a stock. This is most likely to be profitable when a company’s business model is broken. Short-selling a company based only on valuation may also be profitable, but it is also a speculative move.

7 Traits For Companies Seeing Heavy Short-Selling

 Bearishness against a company increases if a company:

- Reports weak earnings
- Is suspected of having or has accounting irregularities
- Loses a major customer
- Is at a competitive disadvantage within the sector it is operating
- Running out of cash
- Has unmanageable debt, and could become bankrupt in the future
- Thin margins are not sustainable for the long term

Business Section: Investing Ideas

Companies that have the highest short interest include:

1. ITT Educational Services Inc. ( ESI, Earnings, Analysts, Financials): Offers postsecondary-degree programs in the U.S. that provide diplomas as well as associate’s, bachelor’s, and master’s degrees. Market cap at $407.87M, most recent closing price at $17.49. For-profit education is in a bubble in the United States. To get a job, students must obtain better education, but the costs are rising. Student debt becomes difficult to manage but school fees keep rising. The business model is unsustainable. Investors have a short interest of 32.22 for ITT.

 

2. Safeway Inc. ( SWY, Earnings, Analysts, Financials): Operates as a food and drug retailer in North America. Market cap at $3.98B, most recent closing price at $16.60. With a short interest of 32.42, Safeway operates with very low margins. Investors are betting Safeway cannot operate at such levels for the long term.

 

3. K12, Inc. ( LRN, Earnings, Analysts, Financials): Provides proprietary curriculum and educational services for online delivery to students in kindergarten through 12th grade (K12) primarily in the United States. Market cap at $720.96M, most recent closing price at $19.57. K12 suffers from the same problems as ITT. Short interest: 33.19.

 

4. Polypore International Inc. ( PPO, Earnings, Analysts, Financials): Develops, manufactures, and markets microporous membranes used in separation and filtration processes. Market cap at $1.72B, most recent closing price at $37.01. GM (GM) idled its production of the Volt. Polypore relies on GM as a customer for its lithium ion battery. Short interest: 34.53

 

5. Sealy Corporation ( ZZ, Earnings, Analysts, Financials): Together with its subsidiaries, manufactures and markets various bedding products. Market cap at $228.98M, most recent closing price at $2.20. Sealy’s proposed merger is facing legal challenges. Investors have a short interest of 34.55 on the company.

 

6. KB Home ( KBH, Earnings, Analysts, Financials): Operates as a homebuilding and financial services company in the United States. Market cap at $1.21B, most recent closing price at $15.69. KB Homes rallied in recent months, as home prices in the U.S. stabilized. Short interest remains high at 34.81, due largely from high debt concerns for the company.

 

 

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