Although there are several technical indicators out there that can give a fair idea about the future trajectory of a stock, most of them prove unreliable in the medium-to-long-term. That’s because most technical indicators are based on price and/or volume data instead of actual transactions, which makes their predictive ability fairly limited during larger time-frames. The few indicators that have predictive power to some degree and prove useful in larger time frames are usually the ones that use actual transactions to gauge the markets’ sentiment towards a stock, which includes short interest data.
At Insider Monkey, we regularly track the short interest data on U.S stocks and share our insights concerning it with our readers. In this post, we will take a look at five stocks which saw a significant increase in their short interest during the second-half of June and will discuss what hedge funds in our system thought about these stocks heading into the second quarter.
Our backtests that covered the period between 1999 and 2012, showed that following the 15 most popular small-caps among hedge funds can help a retail investor beat the market by an average of 95 basis points per month (see more details here).
#5 LendingClub Corp (NYSE:LC)
– Increase in Short Interest Between June 15 and June 30: 22.14%
– Hedge Funds with Long Positions (as of March 31): 23
– Aggregate Value of Hedge Funds’ Holdings (as of March 31): $358.84 million
The short interest in LendingClub Corp (NYSE:LC) rose by 22.14% to cover 23.52% of the company’s float as of June 30. Shares of the online lending marketplace operator have been on a gradual decline since its IPO in December 2014 and are currently trading down by 58.45% year-to-date. In May, LendingClub Corp (NYSE:LC)’s stock slumped heavily after it announced that its founder and CEO, Renaud Laplanche, had resigned following an internal inquiry that revealed irregularities in the sale of $22 million in near-prime loans to a single investor. On June 28, hours before the company’s annual shareholder meeting, LendingClub Corp (NYSE:LC)’s Board named Scott Sanborn, who was serving as the acting CEO of the company following Mr. Laplanche’s departure, as the permanent CEO and disclosed that it will be laying off 179 employees in light of the lower loan volumes in the second quarter.
During the first quarter, the number of hedge funds in our database long LendingClub increased by five and the aggregate value of their holdings in the company jumped by $10.80 million. Funds that initiated a stake in the company during that period included Eric Semler‘s TCS Capital Management, which purchased 369,500 shares.
#4 Denbury Resources Inc. (NYSE:DNR)
– Increase in Short Interest Between June 15 and June 30: 26.26%
– Hedge Funds with Long Positions (as of March 31): 17
– Aggregate Value of Hedge Funds’ Holdings (as of March 31): $56.51 million
Shares of independent oil and natural gas company Denbury Resources Inc. (NYSE:DNR) have fallen by over 25% in the past month, but are still trading up by 66% year-to-date. At the end of last month, the short interest in the company represented 22.40% of its outstanding shares. On June 29, Denbury Resources disclosed that it has agreed to sell its remaining non-core assets in the Williston Basin in North Dakota and Montana to an unnamed buyer for $58 million.
Denbury Resources Inc. (NYSE:DNR) is the only stock in this article which didn’t see an increase in its ownership among the hedge funds that we track during the first quarter, remaining unchanged. D.E. Shaw, founded by billionaire David E. Shaw, was among the hedge funds that significantly boosted their stake in the company during the first quarter, by 753% to 2.12 million shares.
We’ll check out three more stocks with ballooning short interest on the next page.