Rockwell Medical, GoPro, Inovio And Other Hot Stocks In Short-Selling Circles
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 Rockwell Medical Inc (NASDAQ: RMTI).
Other stocks that that saw plenty of short-selling activity included the following:
- Outerwall Inc (NASDAQ: OUTR)
- Inovio Pharmaceuticals Inc (NASDAQ: INO)
- GoPro Inc (NASDAQ: GPRO)
- Sears Holdings Corp (NASDAQ: SHLD)
- SolarCity Corp (NASDAQ: SCTY)
Below is a look at a list of top stocks in the Americas from a security lending perspective.
Top Pick: Rockwell Medical
Rockwell Medical focuses on end-stage renal disease. However, “like many such biopharmaceutical companies, the value in the shares is digitally linked to the success of its drug treatments – digitally as in on or off,” the report explained. It’s all about regulatory approval.
Rockwell trades at less than half the its 12-month high of $18.69. Since July of 2015, the percentage of shares available actually being borrowed has stood above 70 percent – rarely falling below this figure. Over the last week, the proportion surpassed 85 percent, and borrow costs have spiked as a rapid 40 percent surge in the stock price opened the path for a potential short squeeze. “With this kind of negative sentiment continuing, short seller’s expectations of Rockwell’s long-term health seem to be very poor,” the note concluded.
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The rise of online shopping and cash-less purchases has contributed to the decline of Outerwall, which saw its stock tumble more than 53 percent in the past year.
Recent volatility in the stock price generated large increase in demand in the borrowing market as the stock seemed primed for short squeeze, especially taking into account that 90 percent of the shares were already borrowed, borrowing costs were quite high, and the cash price continued to surge.
Inovio made it to the list on the back of a potential Zika virus treatment, which have led to a moderate increase in the stock price, but a very large surge in the attention of short sellers. Borrow volumes have been increasing for roughly a year now and since the beginning, they "reached over 80 percent of the available supply, taking advantage of the near 50 percent slide in the share price over the following months. With volumes now exceeding 90 percent of the supply, there is an increasing volume of positions being taken against the long-term share price of INO."
A hot stocks regular, GoPro made it to the list again. "With the shares trading substantially down from the 12-month peak of $64.74 (August 2015), the short sellers have captured a great deal of value," the report said. Nonetheless, prior to last week short positions reduced by 17 percent with what may well have been profit taking as the share price edged up from the lows to close at $10.31."
Declining borrow volumes and costs indicate a potential change in the sentiment or a resistance level at the action cameras maker. The trend continued over last week, as short interest continued to tumble another 6 percent, borrow costs, an extra 13 percent, and the stock price rose by 20 percent.
"Perhaps GPRO has indeed reached a floor or inflection point; if short sellers continue to close their positions, this may well be the case," the note concluded.
Ahead of the announcement of the company’s fourth quarter results, Sears came in fourth in Astec's list. Analysts are expecting a net loss of roughly $(1.36) per share, worse than the $(0.47) reported a year ago. Revenues are also anticipated to tumble by 10 percent, marking a 19 percent decline for the full year.
While the stock is now trading above recent lows, it's far from its 12-month high above $44. "Short interest has grown significantly since the start of the year, and borrow volume now exceeds 90 percent of the available supply, pushing borrowing costs substantially higher. This Thursday will deliver a telling report on the health and outlook for Sears and confirmation as to whether the now expensive short positions are making money or not," the report said.
SolarCity is another hot stocks regular, having provided considerable returns for short sellers over the past year. With the stock price down about $45 from the 12-moth high of $62.72, it has now managed to slightly bounce back.
"Gaining $2 a share over the past week has brought some cheer to long investors, but the short sellers have responded by boosting their positions even further, moving the borrow volume up by 23 percent in one week," Astec's report highlighted. "This demand, following on from the prior week’s rise of 13 percent, has forced borrow costs to almost double, making this a very expensive share to borrow. Despite falling almost 70 percent from its 12-month peak, the renewed commitment of the short side of the market demonstrates a belief by some that there is further yet to fall."
Disclosure: Javier Hasse holds no positions in any of the securities mentioned above.
Latest Ratings for RMTI
|Nov 2016||Bank of America||Downgrades||Neutral||Underperform|
|Aug 2016||BTIG Research||Initiates Coverage on||Buy|
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