ASEI: Insiders vs. Shorts

The most recent short interest data was recently released by the NASDAQ for the 10/31/2014 settlement date, and American Science & Engineering Inc (ASEI) is one of the most shorted stocks of the Russell 3000, based on 11.09 "days to cover" versus the median component at 5.75. 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 American Science & Engineering Inc ( ASEI), the total short interest at the 10/31/2014 settlement date was 364,856 shares, which compares to the average daily trading volume of just 32,903 shares, for a "days to cover" ratio of 11.09.

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 ASEI share traded represented a short position being closed, then at the average daily volume of 32,903 shares it would only be during the 12th 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 12 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.

American Science & Engineering Inc ( ASEI) 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, ASEI has seen 4 different instances of insider buying, as summarized by the table below:

Purchased Insider Title Shares Price/Share Value
11/13/2014 Charles P. Dougherty President & CEO 1,000 $44.87 $44,870.00
11/13/2014 Jennifer L. Vogel Director 1,500 $44.46 $66,690.00
11/14/2014 Robert N. Shaddock Director 1,095 $45.61 $49,942.95
11/13/2014 Denis R. Brown Director 1,000 $44.97 $44,970.00

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

Loading+chart++2014+TickerTech.com

And looking at the chart below, ASEI's low point in its 52 week range is $43.38 per share, with $74.75 as the 52 week high point — that compares with a last trade of $46.21.

American Science & Engineering Inc Moving Averages Chart

In recent trading, shares of American Science & Engineering Inc ( ASEI) were changing hands at $46.21/share.

More from Stocks

Week Ahead: Trade Fears and Stress Tests Signal More Volatility To Come

Week Ahead: Trade Fears and Stress Tests Signal More Volatility To Come

3 Great Stock Market Sectors Millennials Should Invest In

3 Great Stock Market Sectors Millennials Should Invest In

Why Millennials Are Ditching Stocks for ETFs

Why Millennials Are Ditching Stocks for ETFs

Trump's 'Space Force' Could Launch a $1 Trillion Industry, Morgan Stanley Says

Trump's 'Space Force' Could Launch a $1 Trillion Industry, Morgan Stanley Says

Abiomed Stock Should Rise Some 12% From Here, Piper Jaffray Analyst Says

Abiomed Stock Should Rise Some 12% From Here, Piper Jaffray Analyst Says