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Traders on Monday gather around the post that trades shares of Alcoa on the floor of the New York Stock Exchange (Richard Drew)
Traders on Monday gather around the post that trades shares of Alcoa on the floor of the New York Stock Exchange (Richard Drew)

TheStreet.com

10 U.S. stocks investors are betting will fall Add to ...

Nokia and Time Warner had the largest increases in short interest, according to data from the New York Stock Exchange, even as investors turned less bearish.

Short interest, which measures all uncovered short positions in securities, fell during the second half of February, according to the NYSE. Short positions are bets that a stock will fall, where investors borrow shares and sell them at a higher price, hoping to buy the stock back at a lower price to profit on the difference.

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According to the NYSE, overall short interest fell to 12.6 billion shares through Feb. 28, down more than 1 per cent from 12.8 billion shares on Feb. 15. During that same period, the S&P 500 fell less than 0.1 per cent. The markets have taken a turn for the worse since as oil and commodity prices continue to soar. Since March 1, the S&P 500 has dropped nearly 2 per cent, including Thursday's decline, while oil has topped $100 a barrel.

Several equities listed on the NYSE had rapid increases in short interest during the last half of February, some by as much as 50 per cent. Short interest is one indicator that long investors in these stocks could be in for painful declines.

Nokia, for instance, saw short interest balloon to nearly 100 million positions, putting it in the top five NYSE stocks with the largest current short positions, which routinely includes Citigroup, Ford Motor and Sprint Nextel.

The following is a list of 10 stocks that saw the largest percentage increases in short interest from Feb. 15 through Feb. 28, 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.

D.R. Horton

Company Profile: D.R. Horton constructs and sells homes in U.S. Through the company's financial services operations, it also provides mortgage financing and title agency services.

Short Interest Change: Short interest in D.R. Horton climbed 8.4 per cent to almost 29 million positions as of Feb. 28. Not surprising, the stock is down 3.4 per cent in the last month. D.R. Horton shares were hit hardest on Feb. 22 after the S&P Case-Shiller 20-city index - a key read on the housing sector - fell 2.4 per cent from a year ago.

PMI Group

Company Profile: PMI Group provides residential mortgage insurance products.

Short Interest Change: Short interest in PMI Group climbed 8.9 per cent to 28.5 million positions as of Feb. 28. PMI Group shares have steadily dropped 12 per cent since Feb. 15, the date of the last short interest report, after the mortgage insurer posted a fourth-quarter loss of $184.4-million, or $1.14 a share, as revenue plunged 41 per cent from a year ago to $144.3-million.

General Motors

Company Profile: GM is the world's second-largest automaker, which emerged from Chapter 11 bankruptcy and completed the world's biggest initial public offering in November.

Short Interest Change: Short interest in GM rose 10.8 per cent to 28.8 million positions as of Feb. 28. While the automaker was a high flying IPO pick for hedge fund managers, the stock actually now trades below its IPO price.

U.S. Steel

Company Profile: U.S. Steel is an integrated steel producer of flat-rolled and tubular products with major production operations in North America and Europe.

Short Interest Change: Short interest in U.S. Steel rose 12.4 per cent to 25.4 million positions as of Feb. 28. U.S. Steel shares were buoyed by an upgrade from Goldman Sachs analysts, who said the company will take advantage of rising steel prices. After a temporary bump in share price, though, U.S. Steel shares are down nearly 15 per cent.

Exxon Mobil

Company Profile: Exxon Mobil is engaged in the exploration, production, transportation and sale of crude oil and natural gas and the manufacture, transportation and sale of petroleum products.

Short Interest Change: Short interest in Exxon Mobil rose 12.5 per cent to 33.4 million positions as of Feb. 28. As the price of oil has spiked, so have shares of Exxon, gaining more than 10 per cent from the beginning of the Egyptian protests through a recent peak on Feb. 23 amid the crisis in Libya. Since Feb. 16, though, the stock has slipped 1.6 per cent, which may be an indication that traders are booking quick profits in the oil giant.

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 was up 13.1 per cent to 41 million positions as of Feb. 28. Unlike a majority of the stocks on this list, Chimera shares are up since Feb. 15. Investors are likely lured to the REIT thanks to its attractive 16 per cent dividend yield.

AMR Corp.

Company Profile: AMR Corp. is the parent of American Airlines, which provides scheduled jet service to approximately 160 destinations.

Short Interest Change: Short interest in AMR rose 18.9 per cent to 47.2 million positions as of Feb. 28. It's not surprising that as oil prices have held above $100 a barrel, airline stocks have crumbled and fees have ballooned. After crude surged above $100 on Feb. 18, AMR shares have fallen nearly 15 per cent.

HCP

Company Profile: HCP is a self-administered, real estate investment trust, which acquires, develops, leases, manages and disposes of healthcare real estate and provides financing to healthcare providers.

Short Interest Change: Short interest in HCP rose 22.8 per cent to 23.4 million positions as of Feb. 28. Since Feb. 15, the date of the NYSE's last short interest report, HCP shares are flat. On Feb. 15, HCP said its fourth-quarter results doubled from a year ago, coming in ahead of Wall Street's expectations.

Nokia

Company Profile: Nokia manufactures mobile devices that offer Internet services, music, maps, media, messaging and games.

Short Interest Change: Short interest in Nokia soared 50.5 per cent to 98.6 million positions as of Feb. 28. Nokia shares have plunged more than 20 per cent in the last month, even after news came that Microsoft would pay the handset maker billions of dollars after Nokia agreed to adopt Windows Phone 7.

Time Warner

Company Profile: Time Warner is a media and entertainment company, operating cable television networks, film studios and publishing units. Subsidiaries include Time Magazine, HBO, Warner Bros., CNN, Turner Broadcasting and New Line Cinema.

Short Interest Change: Short interest in Time Warner surged 54.3 per cent to 24.4 million positions as of Feb. 28. The rapid increase in short interest isn't completely surprising as Time Warner shares surged more than 20 per cent in the month of February. On Feb. 2, the media company's fourth-quarter earnings came in ahead of analysts' estimates, spurring the rally in the stock.

 

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