We have identified five stocks that have at least 30% of their outstanding shares shorted, but are also loved by billionaires. The first is J.C. Penney Company, Inc. (NYSE:JCP), which had 24 notable hedge funds – 13F filers – owning the stock as of 3Q, but still has 33% of its outstanding shares shorted. Sales for Penney are expected to be down in FY2013 on the back of reduced traffic and the absence of coupons.
The retailer also expects to see restructuring charges of $1.19 per share in FY2013, with an expected loss per share of $0.85. Penney still trades well below its peers on a P/S basis at 0.3x, versus Kohl’s at 0.5x and Macy’s at 0.6x. This discount is for good reason, though, as analysts do not expect the business to show signs of recovery until FY2014.
We believe that hedge funds are looking beyond J.C. Penney’s interim pressures to what the company can accomplished after its restructuring. Bill Ackman of Pershing Square owns over 39 million J.C. Penney shares – making up over 10% of his 13F portfolio. Other billionaires backing Ackman by owning shares of Penney include Steve Cohen, Israel Englander and Ken Griffin (check out Bill Ackman’s top picks).
GameStop Corp. (NYSE:GME) has over 35% of its shares shorted, but also had 18 notable investors and hedge funds owning the stock as of 3Q. The game retailer has seen pressure from online competitors, which should help push revenues down 7% in FY2013. The interim decline should continue with lower sales of new game hardware and software. Longer-term, the retailer should see a rebound from a move toward digital sales and mobile games. FY2014 revenues are expected to be up by 3% thanks to expected hardware launches. It appears hedge funds are confident that GameStop can pivot effectively enough to avoid drastic sales declines. Another long-term positive is expected margin expansion due to a shift toward digital downloads, if the company can capitalize on this space. Ken Griffin and Steve Cohen are both big-name investors owning GameStop (check out Ken Griffin’s newest picks).
RadioShack Corporation (NYSE:RSH) saw 16 notable investors and hedge funds – 13F filers – owning the stock as of 3Q and meanwhile had 36% of its shares shorted. RadioShack is expected to continue store closures in the U.S., while opening locations in Mexico. The one upside for the company is its expected growth in mobile computing, which should help boost sales up 1% in 2013. RadioShack was pushed down almost 80% in 2012 as it continues a product shift toward smartphones. The next big milestone for RadioShack is a renegotiation of its Target kiosk. Cohen upped his stake in RadioShack over 1,000% last quarter (check out Steve Cohen’s biggest bets).
Who’s No. 4 and 5?