What are we looking for?
U.S. stocks carrying a lot of negative investor sentiment. Or more specifically, the U.S. listings most likely to decline in the coming weeks or months according to short sellers.
More about today's screen
Earlier this week we looked for stocks listed on the Toronto Stock Exchange with both the largest short interest ratio and the lowest short interest ratio. The metric is calculated by dividing the number of shares sold short by the average daily volume of the stock. Today, we focus on stocks of profitable S&P 500 companies with the largest short interest.
The screen lists the 20 stocks with the highest ratios, in descending order, and also shows to what extent the short interest has changed over the last month. We have filtered the search to show only stocks that have seen an increase in short interest during the last month.
What we found
Many investors don't care much for newspaper stocks. Washington Post Co. tops the list and Gannett Co. Inc. helps close it out. Both newspaper companies have seen a significant bump in short interest over the last month. The industry faces the challenges of falling advertising revenue, declining subscriber numbers and rising newsprint costs. Both companies recently delivered quarterly results short of expectations.
The list indicates that short sellers are taking positions against players in the financial and real estate sectors, as well as some tech companies that sell to government agencies. But it's important to note that not all short selling assumes a stock price is about to plummet. Sophisticated investors use short selling to hedge portfolios or to try to capitalize on different valuations between a company's stock and its convertible bonds or preferred shares.
No. 2 on the list is Cincinnati Financial Corp., the property and casualty insurer. Many short sellers of this stock were likely scrambling to cover their positions early this month when the company posted a quarterly operating profit that beat estimates on the Street by a large margin.
No. 3 on the list is AutoNation Inc. Shares of the largest dealership chain in the U.S. are near their record high and chief executive Mike Jackson recently said the auto retail sector has turned around after two years or downsizing and restructuring.