5 Longs Of The Shorts: Deckers Outdoor Corp (DECK), Tesla Motors Inc (TSLA), Skullcandy Inc (SKUL)

Page 1 of 2

Investing in highly shorted stocks is always risky business, especially when these stocks have some of the highest short interest around. The five stocks below all have short interest in excess of 40%, but could be worth taking a look at on the long side. One slight problem with highly shorted stocks is that they are sometimes shorted for a reason. Question is; is the short interest overdone and is their reason to go long any, or all, of these stocks? The five stocks below are highly shorted, but could be worth a closer look for investors looking to add a little speculation to their portfolio.

Tesla Motors Inc (NASDAQ:TSLA)All the high-short stocks appear to be cheap from a valuation standpoint, but could this be due to an overpressured stock price, let’s take a closer look. Over the past twelve months, Skullcandy Inc (NASDAQ:SKUL), Vera Bradley, Inc. (NASDAQ:VRA and Deckers Outdoor Corp (NASDAQ:DECK) are all down over 20%, but Coinstar, Inc. (NASDAQ:CSTR) and Tesla Motors Inc (NASDAQ:TSLA) are up.


Stock Performance
Skullcandy Vera Bradley (NASDAQ:VRA) Deckers Coinstar Tesla
Trailing Twelve Months -43% -24% -51% 16% 66%
Five Years -64% -6% 0% 100% 97%

Skullcandy Inc (NASDAQ:SKUL) has 53%short interest and manufactures headphone and other audio products. The stock is down nearly 40% over the last twelve months and hedge fund interest has been relatively weak for the headphone company. The squeeze, short squeeze that is, has been coming for some time, but Skullcandy is still waiting. The stock is down over 50% over the last six months alone despite meeting or beating earnings in each of the last four quarters. This company is like a number of others below, still growing and still profitable, but getting little attention from long investors, and a lot of attention from shorts. The slowdown may well be attributed to the over-focus of its business model, which relies heavily on consumer discretionary spending. However, with declining unemployment and an improving economy, the company should be able to achieve its projected (by Wall Street analysts) 18% five-year annual earnings growth.

With a market cap of only $180 million, Skullcandy could also be the target of a buyout. Bloomberg even reported that the sharp decline in the stock in the past eighteen months has made the company an attractive takeover target. Skullcandy’s long-term initiatives relate to its plans to expand beyond the U.S., which has been its primary market. Skullcandy is trading at a 7 times earnings, where the industry is near 12 times. Other key metrics that bode well for the valuation includes its S&P relative value. Compared to the S&P 500 price to earnings ratio, Skullcandy has traded at 98% of the S&P 500 P/E over the last five years (on average), but now only trades at 47%.

Vera Bradley, Inc. (NASDAQ:VRA), with around 53% short interest, is a designer and producer of accessories for women, including handbags and leisure items. Vera also has billionaire Steven Cohen as one of its top investors (check out all the hedge funds loving Vera). Vera recently upped its fourth quarter 2012 revenue and earnings guidance, as well as gross margin expectations, now expected to expand 140 basis points for the quarter, year over year. Much of company’s previous weakness has been related to inventory buildup; a problem that management has identified and foresees no issues in being able to move this year. Despite consumer spending weakness in the past, Vera plans to capitalize on an improving economy and even added 54 locations in Dillard stores during the third quarter. Other expansion efforts includes its early-stage entry into Japan. Vera, much like Skullcandy, looks cheap on a relative S&P 500 P/E basis. The company has traded around 150% of the S&P 500 P/E over the last five years, but currently trades at 105%. Vera also boosts one of the top returns on equity at 44%, compared to 16% industry average.

Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

On the Move: The 10 Fastest Growing Businesses in 2015

Fast Money: The 10 Highest Paying Fast Food Restaurants

Mixing It Up: The 14 Best Music Mashups of 2014

Rito Pls Buff: The 10 Least Played Champions in LoL Season 4

10 Covers of Popular Songs that are Better than the Originals

Must See TV: The 9 Most Anticipated Shows of 2015

The 15 Biggest Box Office Bombs of All Time

10 Things The World Can’t Stand About Americans

Picture Perfect: The 6 Smartphones with the Best Cameras

The 10 Best Countries To Work In the World

A Profitable Day At The Track: 5 Tips For Betting On Horses

Tearing You Apart: 6 Bad Habits That Ruin Relationships

Learning on the Job: The 6 Biggest Mistakes Parents Make

Shopaholics Rejoice: The 12 Biggest Malls in the World

Fright Night: 10 Horror Movies Based on True Stories

Mach Mania: The 10 Fastest Jets in the World

Military Heavyweights: The 10 Countries with the Most Tanks

All In: The 7 Richest Poker Players in the World

Abracadabra: The 10 Best Magicians in the World

The 10 Richest Asian Countries in the World in 2014

Eyes in the Sky: 10 Things You Need to Know About Drones

Rising Stars: The 6 Best Silicon Valley Startups

Military Muscle: The 5 Most Advanced Armies in South America

All that Glitters: The 7 Most Luxurious Jewelry Brands in the World

5 Things You Didn’t Know About ISIS but Should

Empowering Your Money: The 5 Best Energy Stocks to Invest In

The 11 Best Android Apps You Can’t Get on iOS

The 10 Most Important International Conflicts in 2014

Mood Enhancers: The 20 Most Uplifting Songs of all Time

Lover Beware: The 8 Countries that Cheat the Most

Breath of Fresh Air: The 25 Countries with the Best Air Quality on the Planet

Singles Beware: The 8 Worst Mistakes Made on First Dates

Healthy and Happy: The 10 Countries with Lowest Healthcare Costs

The 6 Best Company Team Building Activities to Build Workplace Camaraderie

Ships Ahoy: The 10 Busiest Shipping Ports in the World

10 Productivity Tips to Save You Time and Help You Do More With Less

Grab a Bite: The Most Popular Fast Food Restaurants in America

Friday Night Thirst: The 10 Most Popular Cocktails in the World

The 6 Greatest Unsolved Mysteries We May Never Figure Out

7 Useless Products You Never Should’ve Bought

The 5 Reasons Why You’re Single and Miserable

The 7 Most Addictive Foods in the World We Can’t Stop Eating (Even Though We Should)

5 Amazing Places You Can Swim with Dolphins

The Top 7 Most Livable Countries In The World

The 10 Most Expensive Baseball Cards Ever Pulled From A Pack

The 5 Easiest Second Languages to Learn for English Speakers

Silver Spoon: The 6 Richest Families in the World

The 20 Countries with the Largest Prison Populations in the World

The Top 10 Richest Actors in the World

The 10 Best Airline Stocks to Invest In Before They Fly Too High

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!