Most investors own stocks in the hopes of seeing them rise in value over the years. But for short-sellers, betting against stocks is the name of the game, and profits come when share prices fall.
Short-selling has always had a somewhat questionable reputation among mainstream investors, with many companies prevailing on those negative attitudes to blame short-sellers for share-price declines. But often, short-sellers direct their efforts at companies that are fundamentally weak, and as a result, watching the short-interest figures that stock exchanges provide can clue you in to stocks that are especially risky or are facing major obstacles.
With that in mind, let’s look at the four S&P 500 (INDEXSP:.INX) stocks that have the highest percentage of their available share-float sold short, according to the latest available figures from S&P 500 (INDEXSP:.INX) Capital IQ.
U.S. Steel , short position: 29.4% of float and 29.3% of outstanding shares
The steel industry has struggled for a long time, and the continuing sluggishness in Chinese growth has led to major questions about how long investors may have to wait before demand for steel, along with the related commodities that go into producing it, starts to rise. Even with the shares at levels below their 2009 financial-crisis lows, U.S. Steel still has short-sellers believing the stock can fall lower still.
Don’t sell yourself short
Just because these stocks have high short interest doesn’t mean that you should sell them automatically. But short-sellers are focused on the risks involved with these companies, and you should be fully aware of those risks if you intend to own shares of their stock.
Investors and bystanders alike have been shocked by First Solar’s precipitous drop since 2011, but with its most recent news, will First Solar’s rebound continue? If you’re looking for continuing updates and guidance on the company whenever news breaks, The Motley Fool has created a brand-new report that details every must know side of this stock. To get started, simply click here now.
Fool contributor Dan Caplinger has no position in any stocks mentioned. You can follow him on Twitter: @DanCaplinger. The Motley Fool owns shares of GameStop. Try any of our Foolish newsletter services free for 30 days. We Fools don’t all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.