Stocks with a large short interest are of value to investors as they are indicative of a bearish sentiment towards the stock. Shorting a stock implies the selling of a stock that is not owned by the investor. The objective of selling a stock short is to make a profit when it falls to a lower price. Once the price falls, the short seller can buy the stock at the lower price without having to own the stock. Short interest ratio is the ratio of tradable shares being shorted to shares in the market, or the float. Stocks with a large short ratio can show a sharp up move, as any good news leads to a surge in stock price. The short sellers rush to cover their positions leading to a technical appreciation in the stock price. In the article below, we look at 4 stocks and an ETF which have shown a sharp increase in the short interest just before the elections and how their stocks have performed in recent days. Under the Trump presidency, future jobs should also increase as the spending on infrastructure projects is expected to rise.
At Insider Monkey, we track around 750 hedge funds and 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).
Bill Barrett Corporation (NYSE:BBG) is an oil and gas E&P that operates in the Rocky Mountain region of the United States. It has two main areas of production – Denver-Julesburg Basin (DJ Basin) and Uinta Basin. The company has ownership interests in 280 wells and serves as an operator in another 170 wells. This small cap energy stock has a market capitalization of $385 million. The stock saw a massive 111% increase in short interest over the last month with 6.3 days to cover. Out of the 51 million shares of the stock, more than 11.7 shares were sold short. Though the stock has shown a flat performance over the last one year, its price has increased by almost 20% over the last 5 days. Overall, 19 funds tracked by us held close to 27% of the company’s float at the end of June.