U.S. Steel, Tesla And Four Other Hot Stocks Among Short-Selling Circles

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Every week, SunGard's Astec Analytics provides intra-day short-selling market data to its clients. The firm's top pick from a securities lending perspective this week was United States Steel Corporation X

Other stocks that that saw plenty of short-selling activity included the following:

  • GoPro Inc GPRO
  • Tesla Motors Inc TSLA
  • 3D Systems Corporation DDD
  • Cliffs Natural Resources Inc CLF
  • Intrexon Corp XON

Below is a look at Karl Loomes’ list of top stocks in the Americas from a security lending perspective.

Top Pick: United States Steel Corp.

Escalating two spots in this list since last week, U.S. Steel was this week’s top pick. The last few shares that remained available to borrow were borrowed last week. This means that 99.9 percent of all the shares available are now taken down by borrowers as an increasing number of short sellers take positions in the struggling steel maker.

The surging demand has driven the costs to borrow even further, in spite of the fact that the share price recovered $0.94, closing last week at $7.94. Also encouraging for short sellers was Barclays’ February 4 research note, where the analysts set a $7.00 price target on the stock. “With the global steel markets in turmoil there is little doubt there is more to come on this story,” Loomes concluded.

Related Link: Short Sellers Are Betting Against Financials

1. GoPro

After GoPro announced its quarterly results -a net loss of $(0.08) per share, the stock plummeted to an all-time low of $9.78 last week. However, between Friday January 29 and Friday February 5, the borrow volume declined 16 percent. "This may have been due to profit taking as short sellers take advantage of the fall in GPRO’s share price, but it may also have been in advance of the announcement between GPRO and Microsoft regarding the latter licensing some of GPRO’s patents."

2. Tesla Motors

Another hot stocks regular, Tesla was Astec’s No. 2 pick this week. In the week of January 22 to January 29, short interest had actually dropped around 5 percent. However over the last week, the gains were almost fully reversed; an extra 1.2 million shares (or about 4.5 percent of the balance) were added to the short end of the market, the note stated.

As the electric vehicles maker continues to struggle, its stock has lost another $30, “hitting a two-year low and adding extra spark to the returns short sellers are making.” It should also be noted that news about deliveries of its products expected to come in close to the lower end of guidance “has hit hopes of good news next week regarding the announcement of the company’s earnings.”

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3. 3D Systems

3D Systems also moved up two positions on Astec’s list, with borrow volume pushing usage of the shares up to 96.8 percent of the available stock. This rise in usage took place at the same time as “the actual balance on loan fell 4.5 percent, indicating that the supply of DDD shares is continuing to fall, potentially as institutional shareholders sell out of their positions."

The increasing scarcity in supply has made borrowing even more costly: fees rose roughly 28 percent over the same period. And, in addition, those willing to pay the higher costs will also have to wait for their returns, as the stock closed the week up $0.94.

4. Cliffs Natural Resources

“Cliffs is bucking the trend for metals and mining groups this week as the share price gains around 12 percent up to $1.84 from $1.61 a week ago. Short interest, again diverging from its peers, fell by around 10 percent as short positions were closed and borrowers returned approximately 4.5 million shares of the stock,” Astec said.

After expectations were lowered, the Street is expecting a net loss of $(0.34) per share for the first quarter of fiscal 2016. On the other hand, Cliffs has managed to settle a series of Bloom Lake Mine lawsuits for $84 million, without admitting wrongdoing. Moreover, management said that the arrangement will not affect the business financially going forward.

While this is clearly good news, the company operates within an industry subject to macro conditions, “few of which are positive in outlook at present."

More than 35 million shares are still borrowed. This means that short interest in this stock is quite high, same as borrow costs: “This is an expensive trade requiring significant conviction to sustain."

5. Intrexon

The biotechnology specializing in synthetic biology has managed to outperform many of its industry peers, having lost 3.4 percent over the past 12 months – while the Nasdaq Biotechnology Index fell 21 percent.

The company “has also jumped into the spotlight this past week as it was linked with the Zika virus which is spreading rapidly through Brazil and northwards towards the Americas,” Loomes continued.

One of the company's subsidiaries is working on genetically modified mosquitoes. As Interexon touted it as a tool for combating the Zika virus, its shares gained almost $7, turning the aforementioned 3.4 percent loss into a 19.5 percent surge.

Short sellers are often interested in biotechnology stocks “as their success and failure can appear to be digital and a failure to substantiate claims regarding the Zika virus may well precipitate a fast turnaround for XON shares."

Consequently, short interest has risen 5.5 percent driving the cost to borrow up almost 40 percent over the same period. “As the coming weeks prove or disprove the viability of a Zika solution, the short side of the market will be watching very carefully,” Astec concluded.

Disclosure: Javier Hasse holds no positions in any of the securities mentioned above.

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Posted In: Analyst ColorShort IdeasTop StoriesAnalyst RatingsMoversTechTrading IdeasAstec AnalyticsKarl LoomesSunGard
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