Bearishness remained high for a number of technology companies as 2012 came to a close. Between December 14 and December 31 2012, short-selling increased for many popularly-known companies. Rising short-selling volume can be a double-edged sword. If sentiment improves or there is positive news, a short-squeeze will exaggerate the rally. It takes patience to hold a bearish position when this happens. To explore stocks that have high short-selling volumes but have improving fundamentals, there are 5 companies with short-volume of over 10 million shares: Analysis
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1. Research In Motion Limited ( RIMM): Designs, manufactures, and markets wireless solutions for the worldwide mobile communications market. Market cap at $7.11B, most recent closing price at $13.56. RIM shares outperformed even Apple ( AAPL). Since October 2012, Apple shares declined steadily, while RIM shares are up 80% in the same 6-month period. Bullish sentiment is supported by the long-awaited Blackberry 10 release on January 30, 2013. A successful launch remains to be seen, but short-sellers increased their short-position to 137.07 million shares. RIM shares were even downgraded by Bank of Montreal, with a target of just $9. Continued coverage on the new Blackberry 10 device shifted sentiment in a positive way, making a bet against RIM a bad idea at this time. 2. Facebook, Inc. ( FB): Market cap at $68.72B, most recent closing price at $31.72. The much-disliked social networking company saw short-selling decrease to 26.4 million shares on December 31 2012. Since then, shares are up from a $25 December low, closing at $31.72.
Facebook insiders collectively decided not to sell shares. The absence of additional shares is helping Facebook trade above $30. In addition, a powerful user-base in the mobile channels is supporting future growth. Facebook must generate revenue and profit margins in the mobile space to sustain its rally.
EXCLUSIVE OFFER: Jim Cramer’s Protégé, Dave Peltier, only buys Stocks Under $10 that he thinks could potentially double. See what he’s trading today with a 14-day FREE pass.3. Electronic Arts Inc. ( EA): Develops, markets, publishes, and distributes game software and content for video game consoles, personal computers, mobile phones, tablets and electronic readers, hand held game players, and the Internet. Market cap at $4.35B, most recent closing price at $14.24. Short-volume declined by December 31, but is still at 23.7 million shares. Shares were over $15, but traded recently at $14.24 after GameStop (GME) said holiday sales declined by 4.6% in the United States. Globally, sales declined 6.4%. Only Nintendo’s Wii U is giving hope that consumer interest in console games will improve. Investors should also recognize digital sales will only increase as a total of revenue. This would justify upside in the next few quarters. 4. NVIDIA Corporation ( NVDA): Provides visual computing, high performance computing, and mobile computing solutions that generate interactive graphics on various devices ranging from tablets and smart phones to notebooks and workstations. Market cap at $7.63B, most recent closing price at $12.21. Short-selling volume was around 20 million shares. The stock sold-off sharply from above $13 after the company announced its console-gaming initiative through “Project Shield” at CES. Fundamentally, Tegra chips will play an increasingly important role in mobile gaming. Despite its absence in Apple, Android sales will only increase. NVIDIA is well-positioned for sales in the mobile space. 5. Microchip Technology Inc. ( MCHP): Develops and manufactures semiconductor products for various embedded control applications worldwide. Market cap at $6.54B, most recent closing price at $33.59. Bearishness increased to 19.4 million shares in the last two weeks of December 2012. Shares appear to have bottomed at $29, closing recently at $33.59. MHCP has a new MGC3130 chip. The chip can recognize hand gestures in 3 dimensions, and has a range of 6-inches. By using electrical fields, the chip can track gestures while using 90% less power.
Written by Chris Lau . Disclosure: Author has a long position in Electronic Arts.