5 Small-Cap Short Ideas
The small-cap space can be very profitable scouting grounds for trading opportunities. Smaller stocks tend to be more volatile than large caps, and because these smaller companies attract less attention from investors, it could be argued that the small-cap market is less efficient. These inefficiencies can provide talented traders with good risk/reward setups. In Benzinga's continuing coverage of the small-cap space, I ran a very simple scan looking for potential short candidates in the universe of stocks with market caps between $50 million to $300 million.
The metrics used in the scan required that the stock have at least 20% of its float sold short and be down at least 20% year-to-date. Studies have shown that stocks with high short interests tend to under-perform less shorted stocks, and the presence of short-sellers can be a telltale sign that things are not going well at a company. Furthermore, all of these stocks are trending down in 2012, and could see their losses accelerate in the second half of the year. Below, Benzinga highlights 5 potential short candidates in the small-cap space which met the above-stated scanning metrics.
ATP Oil & Gas (NASDAQ: ATPG) - This stock has fallen roughly 26% in 2012, giving the company a market cap of $284 million. A whopping 43% of ATPG's float has been sold short in recent trading sessions. While the stock has halted its fall over the last week, ATPG remains in a downtrend and has a relative strength reading of only 38, indicating that it is still a weak stock.
James River Coal (NASDAQ: JRCC) - The entire coal sector has been decimated in 2012 on weak demand trends, and James River Coal has been one of the worst performers. Year-to-date, shares have fallen nearly 57% and JRCC still has a very high short interest. In recent sessions, as much as 37% of the stock's float had been sold short by bearish traders. After incurring heavy losses on a near daily basis in 2012, JRCC only has a market cap of $108 million. On Tuesday, the stock has lost another 5% to $2.95 despite a rally in a number of other coal names.
Silicon Graphics International (NASDAQ: SGI) - This computer company has seen its share price decline almost 50% in 2012 and the stock continues to be heavily shorted with around 27% of its float still sold short. At current levels, SGI has a market cap of just $186 million. On May 9, the company lowered its full-year 2012 guidance and this has been another downside catalyst for the name, which has lost more than 40% over the last month alone.
The Talbots (NYSE: TLB) - This retailer has seen its share price plunge more than 50% year-to-date. After buyout talks with private equity firm Sycamore Partners fell apart last Friday, the stock has fallen off a cliff. Around 22% of TLB's float is sold short. On Tuesday, TLB has lost another 13% to $1.32. Prior to last week's report that Sycamore is no longer interested in a TLB buyout, the stock had traded above $2.50.
STR Holdings (NYSE: STRI) - Shares of this solar-industry supplier have lost more than 51% in 2012 and continue to trend lower. At current levels, STRI has a market cap of just $166 million. In recent trading sessions, as much as 20% of the stock's float had been sold short on the expectation of even lower prices. The 52-week range in STRI is $3.56 - $16.79 and the stock continues to trade near the bottom of that range. On Tuesday, STRI has fallen another 1% to $3.99.
(c) 2013 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.