But whether those moves are up or down is hard to tell. The reason these stocks are liable to make such moves is because they are heavily shorted. Major news announcements usually have an exaggerated effect on heavily shorted stocks, and earnings announcements definitely qualify as a “major announcement.”
I’ve scoured the markets for the most popular shorted stocks three times before. The first time, my five selections changed price an average of 16% after earnings were announced. The second time, the effect was even more pronounced, with the average stock moving 19%! And in early 2013, the five stocks I chose made an average 13% move.
Here are this quarter’s five stocks to look out for:
| Company | % of Float Short | Earnings Date | Expected Revenue | Expected EPS |
|---|---|---|---|---|
| Heckmann Corporation (NYSE:HEK) | 36% | May 3-10 | $167 million | ($0.01) |
| 3D Systems Corporation (NYSE:DDD) | 32% | April 30 | $102 million | $0.21 |
| InterOil Corporation (USA) (NYSE:IOC) | 34% | May 13-20 | $331 million | ($0.11) |
| Herbalife Ltd. (NYSE:HLF) | 31% | April 29 | $1.1 billion | $1.07 |
| Research In Motion Ltd (NASDAQ:BBRY) | 32% | June 24 | $3.3 billion | $0.04 |
Sources: finviz.com, E*TRADE, Thompson Reuters.
Heckmann Corporation
This company, which will soon be changing its name to Nuverra Environmental Solutions, is in the business of building out the infrastructure necessary to meet the water needs of energy extracting companies — especially those using fracking techniques.
In order to do this, the company has had to spend a lot of money up front to cement its niche-leading position. But that kind of spending, combined with the uncertainty of energy commodity prices, leads investors to doubt Heckmann Corporation (NYSE:HEK)’s viability. Personally, I thought last quarter’s earnings were great, and I own shares of the company’s stock in my own personal holdings.
InterOil Corporation (USA)
Like Heckmann, InterOil Corporation (USA) (NYSE:IOC) is involved in an industry with a volatile variable at play: energy commodity prices. The Australian company performs all of its oil and gas extraction in the island nation of Papua New Guinea.
One of the key aspects that has investors worried, along with the brief tenure of the company in general, is the fact that it seems to be at odds with Papua New Guinea’s energy minister on whether or not an LNG export facility will even be built by InterOil Corporation (USA) (NYSE:IOC).
In general, I’m also wary of a company going into a country where large sections of the population still enjoy indigenous lifestyles. Tribes hold 97% of the land, and infighting over rights to that land has been bubbling up lately.
Herbalife Ltd.
If you want to see stock geeks getting all hot and bothered about a stock, you should follow Herbalife Ltd. (NYSE:HLF). This nutritional supplement company has been in the forefront lately, with Carl Ichan arguing that Herbalife Ltd. (NYSE:HLF) is a solid investment, and William Ackman betting heavily against it.
