LTS: Insiders vs. Shorts

The most recent short interest data was recently released by the NASDAQ for the 07/31/2014 settlement date, and Ladenburg Thalmann Financial Services (LTS) is one of the most shorted stocks of the Russell 3000, based on 10.85 "days to cover" versus the median component at 6.30. 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 Ladenburg Thalmann Financial Services ( LTS), the total short interest at the 07/31/2014 settlement date was 3,694,090 shares, which compares to the average daily trading volume of just 340,395 shares, for a "days to cover" ratio of 10.85.

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 LTS share traded represented a short position being closed, then at the average daily volume of 340,395 shares it would only be during the 11th 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 11 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.

Ladenburg Thalmann Financial Services ( LTS) 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, LTS has seen 10 different instances of insider buying, as summarized by the table below:

Purchased Insider Title Shares Price/Share Value
03/14/2014 Phillip Frost, M.D et. al. Director 100,000 $2.98 $298,430.00
03/14/2014 Jacqueline M. Simkin Director 20,000 $2.94 $58,864.00
03/14/2014 Mark Zeitchick Executive Vice President 5,000 $2.99 $14,964.00
03/14/2014 Saul Gilinski Director 10,000 $3.00 $30,000.00
03/14/2014 Richard M. Krasno Director 5,000 $2.99 $14,961.97
03/14/2014 Adam Scott Malamed Chief Operating Officer 5,000 $2.99 $14,962.00
03/14/2014 Richard J. Rosenstock Director 5,000 $2.99 $14,962.03
03/14/2014 Richard Lampen President and CEO 5,000 $2.99 $14,962.00
03/31/2014 Joseph Giovanniello Senior Vice President 4,009 $2.87 $11,501.82
04/11/2014 Richard J. Rosenstock Director 5,000 $2.68 $13,385.00
04/11/2014 Adam Scott Malamed Chief Operating Officer 5,000 $2.68 $13,400.00
04/11/2014 Mark Zeitchick Executive Vice President 5,000 $2.65 $13,250.00
04/11/2014 Richard Lampen President and CEO 5,000 $2.68 $13,379.00
04/15/2014 Richard Lampen President and CEO 5,000 $2.59 $12,950.00
05/09/2014 Mark Zeitchick Executive Vice President 5,000 $2.70 $13,500.00
05/09/2014 Richard J. Rosenstock Director 5,000 $2.71 $13,565.18
05/09/2014 Adam Scott Malamed Chief Operating Officer 5,000 $2.71 $13,564.64
05/09/2014 Richard Lampen President and CEO 5,000 $2.71 $13,565.18
05/14/2014 Brett Kaufman Senior Vice President and CFO 3,000 $2.80 $8,400.00
05/20/2014 Adam Scott Malamed Chief Operating Officer 5,000 $2.67 $13,350.00
05/20/2014 Phillip Frost, M.D et. al. Director 15,000 $2.65 $39,774.00
05/21/2014 Mark Zeitchick Executive Vice President 5,000 $2.73 $13,650.00
05/21/2014 Richard J. Rosenstock Director 5,000 $2.68 $13,415.98
05/21/2014 Richard Lampen President and CEO 5,000 $2.68 $13,413.00
06/03/2014 Saul Gilinski Director 5,000 $2.93 $14,650.00
06/05/2014 Saul Gilinski Director 1,845 $2.98 $5,498.10
06/09/2014 Saul Gilinski Director 10,000 $3.11 $31,100.00
06/12/2014 Adam Scott Malamed Chief Operating Officer 5,000 $2.79 $13,949.00
06/17/2014 Saul Gilinski Director 4,544 $2.83 $12,864.64
06/25/2014 Jacqueline M. Simkin Director 15,303 $2.96 $45,365.74
06/30/2014 Saul Gilinski Director 60,000 $3.15 $188,700.00
07/01/2014 Phillip Frost, M.D et. al. Director 100,000 $3.26 $326,000.00
06/30/2014 Joseph Giovanniello Senior Vice President 835 $2.99 $2,496.65
07/02/2014 Phillip Frost, M.D et. al. Director 100,000 $3.46 $346,060.00
07/02/2014 Saul Gilinski Director 80,085 $3.43 $274,626.21
07/07/2014 Phillip Frost, M.D et. al. Director 100,000 $3.50 $349,530.00
07/03/2014 Saul Gilinski Director 10,000 $3.48 $34,850.00
07/07/2014 Saul Gilinski Director 40,000 $3.53 $141,300.00
07/08/2014 Saul Gilinski Director 10,000 $3.77 $37,700.00
07/09/2014 Saul Gilinski Director 30,000 $3.85 $115,450.00
07/15/2014 Phillip Frost, M.D et. al. Director 50,000 $3.64 $181,900.00
07/15/2014 Saul Gilinski Director 10,000 $3.55 $35,500.00

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

Loading+chart++2014+TickerTech.com

And looking at the chart below, LTS's low point in its 52 week range is $1.61 per share, with $3.90 as the 52 week high point — that compares with a last trade of $3.66.

Ladenburg Thalmann Financial Services Moving Averages Chart

In recent trading, shares of Ladenburg Thalmann Financial Services ( LTS) were changing hands at $3.66/share.

More from Stocks

Banks Prepare to Up Shareholder Payouts By $30 Billion

Banks Prepare to Up Shareholder Payouts By $30 Billion

Starbucks Just Revealed Some of the Most Worrying Data in Its History

Starbucks Just Revealed Some of the Most Worrying Data in Its History

Dow Plunges on Trade War Worries but Walmart and Verizon Finish Positively

Dow Plunges on Trade War Worries but Walmart and Verizon Finish Positively

Trump's Tariff Attack Hasn't Brought Pain to These Hot Stocks

Trump's Tariff Attack Hasn't Brought Pain to These Hot Stocks

Biotech Firm Sarepta Surges 40% on Positive Test Results

Biotech Firm Sarepta Surges 40% on Positive Test Results