6 Stocks Trending In Short-Seller Circles: From Tesla To Fitbit

Every week, FIS’ 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 Tesla Motors Inc (NASDAQ: TSLA)

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

• Chesapeake Energy Corporation (NYSE: CHK)
• Fitbit Inc (NYSE: FIT)
• Weight Watchers International, Inc. (NYSE: WTW)
• United States Steel Corporation (NYSE: X)
• Rockwell Medical Inc (NASDAQ: RMTI)

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

Top Pick – Tesla Motors

One of the most recurring stocks in Astec’s list, Tesla made it as the top pick this week.

The stock was trading around its 12 month highs last July and, at the time, short interest was quite low. However, short interest started rising rapidly, increasing positions by almost 50 percent since that moment. Over the same period, shares have tumbled from their 12-month high of $282 to $143, a couple of weeks ago – when Tesla made it as Astec’s number 1 pick.

As indicated in the firm’s report two weeks ago, a turnaround may be bound to start, with shares now trading above $186.

Nonetheless, it’s not all good news for Tesla. “The short sellers remain resolute and have, in fact, marginally increased their positions over the last two weeks, and much ground remains to be recovered in order to get within sight of the highs seen last year,” the report concluded.

Chesapeake Energy Corporation

Chesapeake is another hot stocks regular, which had, however, been absent recently. Over the past 12 months, the shares have plummeted about 80 percent; and, since mid 2015, short interest has skyrocketed, as more that 80 percent of the shares available to borrow were borrowed.

Related Link:Rockwell Medical, GoPro, Inovio And Other Hot Stocks In Short-Selling Circles

Notwithstanding, short interest has been declining over the past few weeks, falling below 80 percent in late January. Over the last week, short interest continued to decline another 6 percent, while actual loan volumes dropped by more than 10 percent.

Analysts at Astec explicated that “This dislocation indicates a contraction of supply, which in turn suggests that larger institutional shareholders are selling out of Chesapeake. The rising demand relative to supply has pushed borrowing cost even higher, underlining the ongoing commitment of the short sellers seeking further falls in the share price.”

Fitbit

The market penetration of wearables has been much slower than expected, making Fitbit another hot stocks recurrent. Over the last week, borrow volumes at the company have surged 16 percent, reaching a new record. This provided short sellers with an excellent position to profit from the decline in the stock price – which hit a new low last week.

Related Link: Fitbit Is The Top Wearables Vendor And Is Outpacing Competitors

“Despite an increase in 2015 sales of 150 percent compared with 2014, Fitbit

Inc. released a profit warning last week indicating that profits would fall below expectations, piling further pressure on the struggling technology developer,” Astec expounded.

Weight Watchers International

Last year, Weight Watchers got an expensive endorsement from Oprah Winfrey, which sent the stock to an all-time high of $26.56. However, the company failed to actually capitalize on the hype and gave away most of the gains. By February, the stock was testing a $10 resistance level – and had made some short sellers considerably richer.

A brief recuperation towards the end of the month once again caught the eyes of short sellers, leading to a 12 percent rise in short positions last week, as the stock continued to trade with high volatility.

United States Steel Corporation

A decreasing demand level and cheaper steel from China and Russia have had a big impact in steel producers around the globe. This has resulted in a decline of more than 66 percent in United Steetl’s stock price in one year – not taking into account the 21 percent surge seen on Wednesday. After peaking in mid January, short sellers saw a small reduction in borrow volume up to February 12. After that date, however, the decline was much more significant, amounting to 25 percent over the last couple of weeks.

Related Link: Another Dog Has Its Day: U.S. Steel

“This marks a substantial change in direction for short positions in United States Steel and was matched by a recovery of over 3.5 percent in the share price,” Astec noted. “This may have occurred as a related benefit to action in the EU to squeeze off cheap steel imports or in expectation of similar actions by the US,” the report explained.

Rockwell Medical

Finally, there’s Rockwell Medical, which was Astec’s top pick last week, as a potential short squeeze was looming. The same was seen last week, as borrow volumes continued to rise, from 85 percent of the available supply, to 96 percent. The volume then settled at an elevated 94 percent by the end of the week.

The mounting demand has led to even higher borrowing fees, which rose 44 percent over last week, accompanying a marked increase in the company’s stock price.

“When all three of these factors combine - when the demand pushes the limits of supply - a short squeeze can occur,” Astec assured. “Short sellers try to close their positions, and brokers, unable to borrow the shares, are forced to buy them in more quickly than they might normally,” the note added. “The increased buying pressure pushes the stock price higher, forcing more short sellers to join the frenzy to get out of their positions, making the situation even worse. Rockwell may be benefitting from this artificial boost to its share price, or there may be more fundamental reasons contributing to its recovery. Whatever the case, Rockwell is around $1 from getting back to the levels it was at 12 months ago,” the note concluded.

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