OHI: Insiders Vs. Shorts

The most recent short interest data was recently released by the NASDAQ for the 10/31/2013 settlement date, and Omega Healthcare Investors, Inc. (OHI) is one of the most shorted stocks of the Russell 3000, based on 7.14 "days to cover" versus the median component at 4.31. There are a number of ways to look at short data, but one metric that we find particularly useful is the "days to cover" because it considers both the total shares short and the average daily volume of shares typically traded. The number of shares short is then divided by the average daily volume, to express the total number of trading days it would take to close out all of the open short positions if every share traded represented a short position being closed.

START SLIDESHOW:
Ten Bargains You Can Buy Cheaper Than The Insiders Did »

In the case of Omega Healthcare Investors, Inc. ( OHI), the total short interest at the 10/31/2013 settlement date was 6,937,759 shares, which compares to the average daily trading volume of just 971,915 shares, for a "days to cover" ratio of 7.14.

When short sellers eventually cover their positions, by definition there must be buying activity because a share that is currently sold short must be purchased to be covered. At the present levels of short interest, if from this point forward every single OHI share traded represented a short position being closed, then at the average daily volume of 971,915 shares it would only be during the 8th trading day that every short position would be closed.

So it would stand to reason that should some unexpectedly good news come out, and short sellers did not have 8 days of patience but instead wanted to cover their short positions very suddenly, that situation could result in sending the stock higher until the higher price produces enough sellers to generate the necessary volume to close out those positions quickly.

Omega Healthcare Investors, Inc. ( OHI) has something relatively rare for a stock with this much short interest, that being insiders taking the other side of the trade. Looking back over the trailing six month period, OHI has seen 2 different instances of insider buying, as summarized by the table below:

Purchased Insider Title Shares Price/Share Value
05/23/2013 Craig R. Callen Director 2,000 $34.69 $69,370.00
05/29/2013 Craig R. Callen Director 1,000 $32.31 $32,308.00
11/12/2013 Bernard J. Korman Director 46,070 $31.15 $1,435,080.50

Below is a chart showing the "days to cover" for OHI over time:

Loading+chart++2013+TickerTech.com

And looking at the chart below, OHI's low point in its 52 week range is $21.30 per share, with $38.41 as the 52 week high point — that compares with a last trade of $32.14.

Omega Healthcare Investors, Inc. Moving Averages Chart

In recent trading, shares of Omega Healthcare Investors, Inc. ( OHI) were changing hands at $32.14/share.

null

More from Stocks

The Stock Market Has Every Reason to See a Fresh Rally

The Stock Market Has Every Reason to See a Fresh Rally

3 Simple Tips on Investing From TheStreet's Jim Cramer

3 Simple Tips on Investing From TheStreet's Jim Cramer

Video: There Are Some Big Changes Coming to the PGA Championships in 2019

Video: There Are Some Big Changes Coming to the PGA Championships in 2019

Tesla's Supercharger Network Is Booming -- Here's Why That's a Concern

Tesla's Supercharger Network Is Booming -- Here's Why That's a Concern

Attention 60 Minutes: Google Isn't the Only Big-Tech Monopoly

Attention 60 Minutes: Google Isn't the Only Big-Tech Monopoly