If they think shares will fall they are “short selling” if they think it will rise they are “short covering” – that is to say they are pulling back on their original trades. Therefore, short covering implies short sellers are becoming less pessimistic, and they believe the stocks may have more upside than downside to price in over the next few days and weeks.

We looks at short seller activity month over month, and took only the names with significant short decreases (short covering) (a bullish sentiment).

Investing Ideas: The List

Do you think short sellers are correct that these hedge fund favorites have more upside to price in? Use this list as a starting point for your own analysis.

Interactive Charts: Compare 1-year return for the first 9 stocks listed below

1. American Eagle Outfitters, Inc. ( AEO): Operates as an apparel and accessories retailer in the United States and Canada. Market cap at $4.17B.  Net institutional purchases in the current quarter at 16.0M shares, which represents about 9.31% of the company’s float of 171.79M shares. Shares shorted have decreased from 12.10M to 10.21M over the last month, a decrease which represents about 1.1% of the company’s float of 171.79M shares. Days to cover ratio at 2.48 days.

 

2. Abercrombie & Fitch Co. ( ANF): Operates as a specialty retailer of casual apparel for men, women, and kids. Market cap at $3.9B.  Net institutional purchases in the current quarter at 4.5M shares, which represents about 6.15% of the company’s float of 73.19M shares. Shares shorted have decreased from 11.45M to 10.64M over the last month, a decrease which represents about 1.11% of the company’s float of 73.19M shares. Days to cover ratio at 3.3 days.

 

3. Arena Pharmaceuticals, Inc. ( ARNA): Focuses on discovering, developing, and commercializing oral drugs in the therapeutic areas of cardiovascular, central nervous system, inflammatory, and metabolic diseases. Market cap at $2.06B.  Net institutional purchases in the current quarter at 29.4M shares, which represents about 13.6% of the company’s float of 216.13M shares. Shares shorted have decreased from 61.75M to 56.26M over the last month, a decrease which represents about 2.54% of the company’s float of 216.13M shares. Days to cover ratio at 6.75 days.

 

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