Ever get that sinking feeling that everyone else knows something you don’t? You’re cruising through traffic in a lane that’s wide open, thinking it’s your lucky day, when it suddenly occurs to you that the people in the clogged lane to your left might actually know something you don’t. Usually that the lane you’re in is about to end and you should have gotten over a mile ago.
Sometimes a similar approach to the markets is warranted, and one way to do this is by looking at a company’s short float. When someone shorts a stock, they’re betting that it’s going to drop, and when a lot of people are making the same bet (short float is the percentage of a company’s shares that are being shorted), it could be a sign that they’re onto something. Of course, that doesn’t necessarily mean one should immediately sell a stock if they notice too many people are down on it; the shorts are often wrong. However, a high short float at least warrants some attention. As such, here are the ten companies on the S&P 500 that have the highest level of investors shorting their stocks.
1. First Solar (FSLR)
The crash of the market for solar panels was well publicized, especially after the bankruptcy of Solyndra proved embarrassing to the Obama administration. However, the outlook for Arizona-based First Solar, the world’s largest solar company, remains murky even after the company announced a shift in strategy last year. Clearly, many in the market still think the worst isn’t behind the company as its float short is over 30 percent.
2. GameStop (GME)
The video game store certainly has its doubters. It could be that brick and mortar retailers in general appear to be struggling, and it could also be that gaming appears to be moving more and more into the realm of smart phones and tablets, but investors are currently shorting GameStop at a rate of just under 30 percent.
3. SUPERVALU (SVU)
No, the ticker not the Law and Order show. Here’s another retailer that has investors seeing red (on the balance sheet that is). SUPERVALU’s short float is over 25 percent.
4. Lennar Corporation (LEN)
According to Reuters, “Lennar Corporation is a homebuilder and a provider of financial services. The Company, through its Rialto Investments (Rialto segment), is an investor in distressed real estate assets.” Does that sentence scare you? Maybe it should, because almost 23 percent of those invested in the company’s stock are shorting it.
5. United States Steel Corporation (X)
This storied company was created after J.P. Morgan (JPM) bought the Carnegie Steel Company from Andrew Carnegie. That was over a century ago, though, and the current downturn in the economy, combined with the chance of slowing growth in China, could mean bad things for steel prices. Some 23 percent of U.S. Steel’s float is short interests as a result.
6. AK Steel Holding (AKS)
AK Steel doesn’t have nearly as interesting a story regarding its origins, but the reasons why investors are shorting it at such high level are most likely pretty similar to why they’re down on U.S. Steel. AK Steel has a short float of over 20 percent.
7. Netflix (NFLX)
For those of you emerging from your abode beneath a large stone, Netflix had a wee bit of a hiccup in their share price last year. Apparently, there are quite a few folks who think the company’s still got room to fall. The shorts own over 17 percent of the company’s float.
8. J.C. Penney (JCP)
While there are most likely more specific reasons at play as well, the fact that three of the companies on this list are all retailers is probably a sign that the decline of retail is something many investors are betting on. J.C. Penney’s short float is just over 17 percent.
9. Express Scripts (ESRX)
Does this mean that George Paz is overpaid? Express Scripts has shown steady growth over the last five years, with share prices jumping almost 200 percent in that period. There are those, though, predicting doom and gloom for the company, though, as just under 17 percent of its float is from shorts.
10. Pitney Bowes (PBI)
This could have something to do with the recent struggles of the Post Office, but it appears as though a fair share of investors do not see bright things in this mail processing supply company’s future. Pitney Bowes has a short float of over 15 percent.