AMRI: Insiders vs. Shorts

The most recent short interest data was recently released by the NASDAQ for the 04/30/2014 settlement date, and Albany Molecular Research, Inc. (AMRI) is one of the most shorted stocks of the Russell 3000, based on 22.63 "days to cover" versus the median component at 5.62. 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 Albany Molecular Research, Inc. ( AMRI), the total short interest at the 04/30/2014 settlement date was 6,508,425 shares, which compares to the average daily trading volume of just 287,639 shares, for a "days to cover" ratio of 22.63.

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 AMRI share traded represented a short position being closed, then at the average daily volume of 287,639 shares it would only be during the 23rd 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 23 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.

Albany Molecular Research, Inc. ( AMRI) 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, AMRI has seen 2 different instances of insider buying, as summarized by the table below:

Purchased Insider Title Shares Price/Share Value
11/22/2013 William S. Marth Director 20,000 $11.57 $231,400.00
12/03/2013 William S. Marth Director 30,000 $10.75 $322,500.00
05/12/2014 William S. Marth President and CEO 30,000 $15.40 $462,000.00
05/15/2014 George Svokos SVP Sales & GM of API 10,000 $15.60 $156,000.00

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

Loading+chart++2014+TickerTech.com

And looking at the chart below, AMRI's low point in its 52 week range is $9.71 per share, with $20.55 as the 52 week high point — that compares with a last trade of $15.50.

Albany Molecular Research, Inc. Moving Averages Chart

In recent trading, shares of Albany Molecular Research, Inc. ( AMRI) were changing hands at $15.50/share.

More from Stocks

Stocks Trade Mixed Amid Progress on U.S.-China Trade; Dow Turns Lower

Stocks Trade Mixed Amid Progress on U.S.-China Trade; Dow Turns Lower

Micron Shares Soar; Chipmaker Is 'Managing for Profitability' Now, Says Analyst

Micron Shares Soar; Chipmaker Is 'Managing for Profitability' Now, Says Analyst

Big Banks' Shift to Digital Could Bring These Significant Shareholder Benefits

Big Banks' Shift to Digital Could Bring These Significant Shareholder Benefits

Red Hot Micron Is Still One Heck of a Bargain

Red Hot Micron Is Still One Heck of a Bargain

Stacey Cunningham: From Intern to Head of the New York Stock Exchange

Stacey Cunningham: From Intern to Head of the New York Stock Exchange