TGI: Insiders vs. Shorts

The most recent short interest data was recently released for the 10/14/2016 settlement date, and Triumph Group Inc. (TGI) is one of the most shorted stocks of the Russell 3000, based on 8.88 "days to cover" versus the median component at 6.24. 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 Triumph Group Inc. ( TGI), the total short interest at the 10/14/2016 settlement date was 5,581,307 shares, which compares to the average daily trading volume of just 628,287 shares, for a "days to cover" ratio of 8.88.

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 TGI share traded represented a short position being closed, then at the average daily volume of 628,287 shares it would only be during the 9th 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 9 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.

Triumph Group Inc. ( TGI) 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, TGI has seen 3 different instances of insider buying, as summarized by the table below:

Purchased Insider Title Shares Price/Share Value
11/07/2016 Thomas K. Holzthum EVP, Integrated Systems 10,000 $25.50 $255,000.00
11/07/2016 Richard Lovely SVP, Human Resources 2,000 $25.12 $50,250.00
11/07/2016 Daniel J. Crowley President & CEO 50,000 $25.56 $1,278,060.00

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

Loading+chart++2016+TickerTech.com

And looking at the chart below, TGI's low point in its 52 week range is $22.40 per share, with $44.08 as the 52 week high point — that compares with a last trade of $27.70.

Triumph Group Inc. Moving Averages Chart

In recent trading, shares of Triumph Group Inc. ( TGI) were changing hands at $27.70/share.

More from Stocks

Abercrombie & Fitch CEO: We Aren't the Same Abercrombie You Once Knew

Abercrombie & Fitch CEO: We Aren't the Same Abercrombie You Once Knew

Amazon Wants to Use Your Car as a Mobile Warehouse - Here's What That Could Mean

Amazon Wants to Use Your Car as a Mobile Warehouse - Here's What That Could Mean

Chipotle's New CEO Has Set its Path for Redemption

Chipotle's New CEO Has Set its Path for Redemption

TheStreet Is About to Hold the BEST Institutional Investor Conference of 2018

TheStreet Is About to Hold the BEST Institutional Investor Conference of 2018

Twitter's Turnaround Continues but Investors Don't Seem Entirely Convinced

Twitter's Turnaround Continues but Investors Don't Seem Entirely Convinced