Short-selling, or betting that a stock will go down, does not get quite as much attention as long investing, but it certainly has its vocal proponents. The famous trader/short-seller Jim Chanos, for instance, made a fortune shorting energy giant/pyramid scheme Enron, and was one of the first people to point out that the company’s accounting practices seemed fishy. When done like Chanos does, short-selling, can actually be a force of good, a byproduct of diligent investor research that can expose the underlying instability of a doomed company.
While short-sellers aren’t always right, it can be interesting to see which stocks Wall Streeters have started shorting en masse. So we went looking for which companies on market had the highest float short, with an emphasis on “household name” stocks that neophyte investors tend to be attracted to.
These are the five commonly known stocks most hated by investors as of Oct. 17:
Outerwall Inc. (previously Coinstar) ($OUTR)
Current Share Price: $64.72
Float Short: 34.68 percent
Why Wall Street Might Hate Them: Outerwall began as Coinstar, which put change kiosks into supermarkets, turning change into cash for an approximate 9 percent cut. But Outerwall isn’t just in the money-changing business: they’re in the kiosk business, with their most popular installation being video-rental delivery system RedBox. While still moderately popular, RedBox is getting absolutely crushed by Netflix Inc. ($NFLX), which many analysts have pegged as being the future of video rental.
Why Wall Street Might Be Wrong: Outerwall is actively diversifying, looking to move into coffee-dispensing kiosks and other food and beverage stands that capitalize on a lack of labor costs. If successful, the company can move past RedBox and prove the shorters wrong.
RadioShack Corp. ($RSH)
Current Share Price: $3.35
Float Short: 36.75 percent
Why Wall Street Might Hate Them: RadioShack has seemed like a moribund company for some time, a relic of a bygone age. Even back in 2007, the satirical newspaper The Onion published an article entitled Even CEO Can’t Figure out How RadioShack Still in Business.
Why Wall Street Might Be Wrong: But six years later, they’re still around, and while they have indeed dropped off precipitously as mainstream technology has advanced past them, they’ve found a bit of a second life as a specialty electronics retailer, and have continued to defy short-sellers.
Angie’s List ($ANGI)
Current Share Price: $15.37
Float Short Percentage: 41.58 percent
Why Wall Street Might Hate Them: Angie’s List recently spooked investors by announcing they were drastically cutting the price of their contractor-review site, leading to speculation they weren’t bringing in the customers at nearly a fast enough clip. Coupled with the facts that Angie’s List is bleeding market share to Yelp Inc. ($YELP) and does not look to grow anytime soon, Angie’s List’s prospects look incredibly dire.
Why Wall Street Might Be Wrong: The heavy short action against Angie’s List has been spurred by this speculation, but for the time being it’s just that. In their defense, Angie’s List said the price slash was an experiment for specific markets. Until Angie’s List reports on Oct. 23, no investor can be quite sure the company is losing membership as fast as suspected, or is indeed just trying something new.
SodaStream International Ltd. ($SODA)
Current Share Price: $60.87
Float Short: 45.90 percent
Why Wall Street Might Hate Them: SodaSteam is based almost exclusively around one product: the eponymous SodaStream home carbonator. There’s no question this Israel-based company has found enormous success with their one product, especially in Nordic countries. But the extreme lack of diversification means the company is incredibly vulnerable, and is always one competitor’s invention away from going kaput.
Why Wall Street Might Be Wrong: Short sellers previously loved Green Mountain Coffee Roasters, another company largely based on one product: single serving “K-cups” of coffee. While the company did indeed drop last year, they have rebounded throughout 2013, proving that sometimes one good product is all you need.
Martha Stewart Living Omnimedia ($MSO)
Current Share Price: $2.29
Float Short Percentage: 48.89 percent
Why Wall Street Might Hate Them: Martha Stewart’s reputation has taken quite a hit since she went to the pokey for insider trading. While her media empire is still formidable, she is nowhere near the ubiquitous media force she once was, not to mention magazines in general are in decline. The confluence of dying magazine industry and the sullied reputation of its namesakes has made this company one of the most shorted on the entire market.
Why Wall Street Might Be Wrong: Martha Stewart is like the cockroach: a being that resfuses to die no matter the circumstances. If one person can make something positive out of a dire situation, look to America’s Mom.
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