In 2007, Ecopetrol made the move from being a part of the government to being a self-run corporation whose largest shareholder just happened to be the government. While that separation has helped increase investors' willingness to buy stakes in EC, it's important for investors to remember that the powers-that-be in Bogota still have the reins of this firm. Even so, the sheer size of Ecopetrol makes maximizing profitability strategically important – and puts investors and the Colombian government on the same side. A short interest ratio of 20.2 means that it would take more than a month of buying pressure for short sellers to cover their positions at current volume levels.
Infosys has built a lucrative business providing firms in the West with outsourced IT services from its home base in Bangalore, India. Infosys was one of the first major offshoring contractors to pop up in India in the 1980s, and that first-to-market status counts for INFY's operations today. A skilled workforce of low-cost Indian programmers and consultants gives the firm pricing that competitors at home can't match alongside expertise that's not easily recreated by other Indian firms.
Infosys' bread and butter is application development and maintenance – or more specifically, helping its customers trim some of the costs associated with hiring high-salary IT programmers and developers. But in recent years, Infosys has been making other IT services a bigger chunk of its revenue pie. That, in turn, has helped to hike the firm's net margins significantly.
A couple of macro headwinds have been challenging INFY more recently, however. The firm's pursuit of premium pricing has some clients reconsidering their needs as high unemployment here at home makes "onshoring" more economically viable again. That said, the firm has plenty of time to figure out its next move – revenues continue to climb at a stair-step pace, and a debt-free balance sheet with $4-billion in cash give it plenty of wherewithal.
A short interest ratio of 15.5 makes Infosys a strong candidate for a short squeeze.
$21-billion surgical equipment firm Intuitive Surgical is having a strong year in 2012 – shares have rallied almost 16 per cent since the first trading day in January. By now, that's got to be wearing on short sellers who've been putting money on a material drop in ISRG's share price. Right now, the firm's short interest ratio of 12.2 indicates that it would take more than two weeks of buying pressure for shorts to cover at current volume levels.
Intuitive develops and sells robotic surgical systems for hospitals that want to be able to perform less-invasive surgeries than would be possible if done by a surgeon's hand. The firm's da Vinci system is currently deployed in more than 2,000 hospitals around the globe. Robotic surgery isn't just a fad – it offers patients truly significant benefits like quicker recovery times and fewer complications. As a growing number of surgeons get trained on the da Vinci system, switching costs of adopting a new platform start to get quite high, giving ISRG a sticky customer base and a big competitive advantage. The firm is also able to earn large recurring revenues by servicing machines and selling surgical instruments.
That said, it's clear that shorts are betting against the premium price tag that this stock currently sports. ISRG is unquestionably a growth stock, and metrics like its P/E ratio prove it. While value investors aren't jumping onboard ISRG right now, it's hard to argue with the sales and profit growth trajectory that this stock has been moving along for the last several years – and a debt-free balance sheet with more than $2-billion in cash and investments helps temper the loftiness of Intuitive's valuation. Upcoming earnings could be a short squeeze catalyst for this stock.
Digital Realty Trust
Technology real estate investment trust Digital Realty Trust rounds out our list. This niche REIT owns more than 100 properties around the globe, focused mainly on data centres, Internet gateways, corporate HQs and manufacturing facilities. The firm currently sports a short interest ratio of 11.1.Report Typo/Error