Six Financial Plays Investors are Betting Against

Jacob Harper |

There are a wide array of investment strategies that don't get the attention from retail investors of tried-and-true value investing. One in particular that is popular with sophisticated market players that doesn't get quite the press of value investing is shorting, or betting that a particular equity will fall in price. While less well known, it can be quite lucrative indeed.

Noted "shorter" Jim Chanos has argued that shorting is an essential part of keeping the market, as short sellers are "real-time financial detetctives" who zero in on companies with improper valuations. But shorting isn't just altruistic; if correct shorting stocks can net stock players a fortune, as Chanos did when he bet against Enron.

Keeping in mind that shorting is a "real-time" detetctive endeavour, we decided to look at the young 2014 market and see what stocks investors are shorting heavily right now. To narrow the scope a bit more, we decided to focus on the otherwise bullish Financial sector, and limit our scope to companies worth between $200 million and $3 billion, commonly known as "small-caps."

A "float short" or over 20 percent (where 20 percent of shares are being shorted) is considered unusually high, and indicate a stock investors are currently wary of. All six of these stocks are currently carry a short float of at least 20 percent:

Encore Capital Group (ECPG)

Market Cap: $1.24 billion

Price: $48.51

P/E:17.08

Float Short: 22.71 percent

 

HCI Group, Inc. (HCI)

Market Cap: $544.06 million

Price: $50.79

P/E:9.23

Float Short: 23.39 percent

 

PacWest Bancorp (PACW)

Market Cap: $1.89 billion

Price: $42.64

P/E: 27.69

Float Short: 30.64 percent

 

PHH Corporation (PHH)

Market Cap: $1.35 billion

Price: $23.48

P/E: 10.87

Float Short: 29.92 percent

 

Western Asset Mortgage Capital (WMC)

Market Cap: $355.76 million

Price: $14.76

P/E: N/A

Float Short: 21.57 percent

 

World Acceptance Corp. (WRLD)

Market Cap: $992.54 million

Price: $85.35

P/E: 10.32

Float Short: 36.82 percent

 

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

Companies

Symbol Name Price Change % Volume
WMC Western Asset Mortgage Capital Corporation 10.54 -0.05 -0.47 156,649
HCI HCI Group Inc. 32.35 -0.49 -1.49 39,465
ECPG Encore Capital Group Inc 26.80 -0.15 -0.56 169,817
WRLD World Acceptance Corporation 55.99 -0.34 -0.60 84,364
PACW PacWest Bancorp 51.81 -0.73 -1.39 774,876
PHH PHH Corp 14.25 -0.16 -1.11 331,131
JDSHF Jardine Strategic Holdings Ltd (Bermuda) 32.81 -0.48 -1.44 100

Comments

Emerging Growth

Naked Brand Group Inc

Naked Brand Group Inc through its wholly-owned subsidiary is engaged in manufacturing and selling of direct and wholesale men's undergarments to consumers and retailers.

Private Markets

Airbnb

Airbnb is a community marketplace for people to list, discover, and book unique accommodations around the world — online or from a mobile phone. Whether an apartment for a night,…

Ozobot by Evollve Inc

Ozobot is a world leader in compact super intelligent robots that entertain and educate through fun interactive gaming.