Rite Aid and Home Depot had the largest increases in short interest at the end of March, according to data from the New York Stock Exchange, as investors turned more bearish on the market.
Short interest, which measures all uncovered short positions in securities, rose during the second half of March, according to the NYSE. Short positions are bets that a stock will fall. Investors borrow shares and sell them, hoping to buy the stock back at a lower price to profit on the difference.
According to the NYSE, overall short interest increased to 12.64 billion shares through March 31, up 0.9 per cent from 12.54 billion shares on March 15. During that same period, the S&P 500 rose 2.3 per cent, recovering from the lowest point of the year March 16.
The markets took a turn for the worse in mid-March on violent protests in the Middle East and North Africa as well as the earthquake and tsunami that battered the northeast region of Japan. Stocks have rebounded since that March 16 low, even as oil and commodity prices continue to soar and Japan continues to wrestle with a possible nuclear catastrophe.
Several equities listed on the NYSE had rapid increases in short interest during the last half of March, some by as much as 233 per cent. Short interest is one indicator that long investors in these stocks could be in for painful declines.
The following is a list of 10 stocks that saw the largest percentage increases in short interest from March 15 through March 31, ranked in reverse order. This data was pulled from the NYSE and NYSE Arca's top 100 positions, which is released on a bi-monthly basis.
Company Profile: Masco manufactures, distributes and installs home improvement and building products including faucets, cabinets, architectural coatings and windows.
Short Interest Change: Short interest in Masco climbed 18.2 per cent to 24.5 million positions as of March 31. The stock is down 2.6 per cent over the past month. In February, shares of Masco fell sharply after the company said its fourth-quarter loss widened, falling short of Wall Street's forecast.
9. Verizon Company Profile: Verizon is the well-known U.S. communications-services company, offering wireless service through its Verizon Wireless joint venture and high-speed Internet and digital phone service, known as Verizon FiOS.
Short Interest Change: Short interest in Verizon rose 19.2 per cent to 43.9 million positions as of March 31. The stock is up 5.6 per cent over the past month, recovering quickly from a recent low on March 16. The share price increase came even after rival AT&T(T_) announced a $39-billion offer for T-Mobile USA, which would catapult the company ahead of Verizon in total wireless subscriber numbers.
8. Alpha Natural Resources
Company Profile: Alpha Natural Resources is a supplier and exporter of metallurgical coal for use in the steel-making process. The company is also a major supplier of thermal coal to electric utilities and manufacturing industries. In January, the company said it will acquire Massey Energy for $7.1-billion.
Short Interest Change: Short interest in Alpha Natural Resources increased 20.8 per cent to almost 27.5 million positions as of March 31. The stock is up nearly 10 per cent over the past month. The increase in share price comes as investors believe coal will benefit from the situation with Japan's nuclear plant.
7. Annaly Capital Management Company Profile: Annaly Capital is a real estate investment trust, or REIT. The company invests in mortgage pass-through certificates, collateralized mortgage obligations and other mortgage-backed securities.
Short Interest Change: Short interest in Annaly Capital rose 25 per cent to over 36 million positions as of March 31. The stock is down 1.8 per cent over the past month. Annaly went ex-dividend on March 29, paying a dividend of 62 cents a share.
6. Charles Schwab
Company Profile: Charles Schwab is a savings-and-loan holding company. Through its subsidiaries, Schwab is engaged in securities brokerage, banking and related financial services.
Short Interest Change: Short interest in Schwab climbed 25.5 per cent to almost 36.6 million positions as of March 31. The stock is down 1.8 per cent over the past month, leading up the company's first-quarter earnings report, due on Friday. On March 21, Schwab announced a $1-billion stock deal to acquire OptionsXpress.
Company Profile: Gap operates retail and outlet stores, selling casual apparel, accessories and personal care products for men, women and children.
Short Interest Change: Short interest in Gap rose 27.1 per cent to nearly 22.7 million positions as of March 31. The stock is up 1 per cent over the past month, even though the retailer has significant exposure to the Japan crisis. In early April, Gap posted weak same-store sales for March, saying that it would fall short of Wall Street's earnings expectations for the first quarter.
4. LDK Solar
Company Profile: LDK Solar is a solar-module manufacturer. The company sells multicrystalline and monocrystalline wafers globally to manufacturers of solar cells and modules.
Short Interest Change: Short interest in LDK Solar climbed 37.6 per cent to nearly 22 million positions as of March 31. The stock is up 8.5 per cent over the past month, rebounding after a selloff sparked by the company's fourth-quarter financial release. On March 17, LDK Solar said revenue more than tripled to $921-million, coming in ahead of the company's projections. LDK's sales guidance range for the first quarter had a midpoint above Wall Street's average forecast.
3. Chimera Investment
Company Profile: Chimera Investment is a specialty finance company that invests in residential mortgage backed securities, or RMBS, residential mortgage loans, real estate-related securities and various other asset classes.
Short Interest Change: Short interest in Chimera jumped 47.6 per cent to more than 54 million positions as of March 31. The stock is down 7.3 per cent over the past month. Like Annaly Capital, the stock went ex-dividend on March 29, although the payment of 14 cents a share was below the previous dividend in December of 17 cents a share.
2. Home Depot
Company Profile: Home Depot is a home-improvement retailer. The Home Depot stores sell an assortment of building materials, home improvement and lawn and garden products and provide a number of services.
Short Interest Change: Short interest in Home Depot more than doubled to 37.6 million positions as of March 31. The stock is up 1.2 per cent over the past month, rising after Home Depot announced on March 28 that it will sell $2-billion in senior notes to refinance $1-billion in senior notes due to be repaid as well as to repurchase $1-billion in outstanding shares.
1. Rite Aid
Company Profile: Rite Aid operates a retail drugstore chain in 31 states across the U.S.
Short Interest Change: Rite Aid saw the biggest increase in bearish bets, as short interest in the stock soared 233.6 per cent to 69.3 million positions as of March 31. The stock is down 14 per cent over the past month leading up to Rite Aid's fourth-quarter earnings results. On April 7, Rite Aid posted a narrower-than-expected loss and its sales stabilized. The company said it may narrow its losses significantly in fiscal 2012, and forecasted stronger revenue than analysts expected.
Follow us on Twitter:
- Masco Corp$25.26-0.25(-0.98%)
- Verizon Communications Inc$49.78-0.20(-0.40%)
- Annaly Capital Management Inc$9.66-0.09(-0.92%)
- Charles Schwab Corp$21.81-0.90(-3.94%)
- Gap Inc$22.47-0.08(-0.35%)
- Chimera Investment Corp$11.46-0.25(-2.16%)
- Home Depot Inc$113.06-1.27(-1.11%)
- Rite Aid Corp$7.75-0.03(-0.39%)
- Updated February 11 10:23 AM EST. Delayed by at least 15 minutes.