Five NYSE Stocks With Sinking Short Interest

Although U.S. equities have seen a pullback in the last few days, all three benchmark indexes are trading close to record high levels. While bulls argue that the market will continue to be driven by excess liquidity in global markets, bears note that current valuations are not justified. It has been tough market for short sellers even though they are correct in their assessment of current valuations. In many cases short sellers are also overstretched due to a high short interest and short ratio in a stock they are betting against.

In this article, we will take a look at some stocks that actually has seen their short interest drop substantially. Among these stocks are: Lockheed Martin Corporation (NYSE:LMT), Allison Transmission Holdings Inc. (NYSE:ALSN), Sibanye Gold Ltd (ADR) (NYSE:SBGL), Monster Worldwide, Inc. (NYSE:MWW), and Hershey Co (NYSE:HSY). In addition, we will also look at the hedge fund sentiment on these stocks.

At Insider Monkey, we track around 740 hedge funds and other institutional investors. Through extensive backtests, we have determined that imitating some of the stocks that these investors are collectively bullish on can help retail investors generate double digits of alpha per year. The key is to focus on the small-cap picks of these funds, which are usually less followed by the broader market and allow for larger price inefficiencies (see more details about our small-cap strategy).

Lockheed Martin Corporation (NYSE:LMT)’s stock has had a decent run this year. Despite a dip in the past month, the stock is still up by almost 10% for the year. Although Lockheed Martin shares have seen a sharp pullback in the last one month, short interest in the stock has fallen considerably. At the end of last month, short interest in Lockheed Martin stood at 2.2% of the float, down by 81.8% from the short interest reported on August 15. The short ratio stood at 1 at the end of August. Among the 749 funds in our database, 39 held $1.18 billion worth of Lockheed Martin shares at the end of June, amassing 1.60% of the outstanding shares, compared to 37 funds holding $867.13 million worth of stock a quarter earlier.

Allison Transmission Holdings Inc. (NYSE:ALSN) has recently initiated an offering of $500 million in aggregate principal amount of senior unsecured notes due 2024. The notes were issued in a private placement and the net proceeds from the offering will be used to repay approximately $700 million of the company’s outstanding term loans. At the end of last month, short interest in Allison Transmission Holdings stood at 0.7%, down by 51.7% from August 15. A total of 34 funds tracked by us held $1.84 billion worth of Allison Transmission’s stock in aggregate at the end of June, compared to 38 funds holding $1.80 billion worth of shares a quarter earlier. 

Sibanye Gold Ltd (ADR) (NYSE:SBGL) shares have seen a huge rally so far this year as gold prices have bounced back. Year-to-date, the stock has gained nearly 135%. Sibanye has also seen a sharp drop in short interest for the most recent period. Between August 16 and August 31, short interest in the stock dropped by 50%. The number of investors from our database long Sibanye Gold at the end of June stood at 12, holding $86.64 million worth of shares or 2.80% of total outstanding shares, compared to nine funds holding $723.03 million worth of shares at the end of March.

Earlier this week, Monster Worldwide, Inc. (NYSE:MWW) has issued a statement in response to MediaNews Group’s letter to the company. MediaNews had revealed a large stake in Monster Worldwide last month and had opposed the company’s sale to Randstad. Monster noted that this transaction provides shareholders with immediate and certain cash value of $3.40 per share, while MediaNews Group’s strategy to deliver shareholder value is still unclear. Monster Worldwide has also seen a sharp drop in short interest in the most recent period. Short interest slid by 48.8% to 5.2% in the second half of August. Short ratio stood at 2 at the end of the last month. A total of 19 funds we track were long Monster Worldwide at the end of the June quarter, unchanged over the quarter, while the total value of their holdings declined to $26.61 million, which equals to 12.50% of the outstanding stock, from $34.93 million a quarter earlier.

Hershey Co (NYSE:HSY) shares saw a sharp pullback late last month after Mondelez International Inc (NASDAQ:MDLZ) said that it is dropping its bid for the company. Hershey had received a $23 billion takeover offer from Mondelez back in June. Mondelez though voluntarily decided to drop the bid. Nevertheless, Hershey’s stock saw a drop in its short interest at the end of the last month. On August 31, short interest in the company stood at 1.1%, down by 46.2% from August 15th. while short ratio stood at 1 at the end of the month. A total of 28 investors from our database amassed $632.34 million worth of Hershey shares at the end of the second quarter, compared to 21 funds holding $472.94 million worth of shares at the end of March.

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