Short interest usually gives stock market participants a sense of how pessimistic and bearish investors are towards a particular company’s stock. As a general rule, short sellers are viewed as an extremely smart group of investors, so it does pay off to be aware of the companies they are shorting. As the risk of a loss on a short sale is infinite, only seasoned investors highly familiar with the risks should engage in short selling.
Short interest represents the number of shares of a particular company’s stock that bearish traders and investors have sold short but not yet covered. Therefore, the level of short interest on individual equities represents a very efficient and accurate method for measuring investor sentiment. After all, if the short interest of a stock declines meaningfully, the motives behind short sellers’ decision to short in the first place might be cooling off. With that being said, the following article will lay out a list of five NYSE-listed companies that had the highest percentage of shares shorted compared to their float at the end of August.
At Insider Monkey, we track around 730 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).
#5. Vivint Solar Inc. (NYSE:VSLR)
– Short Interest Ratio: 46.4%
– Investors with Long Positions (as of June 30): 6
– Aggregate Value of Investors’ Holdings (as of June 30): $13.11 Million
Around 10.01 million shares of Vivint Solar Inc. (NYSE:VSLR) were sold short on August 31, accounting for a disturbing 46.4% of the company’s float. The most recent short interest data showed a 191,690 share-increase in total short interest for Vivint Solar in the second half of August. There were six hedge funds followed by Insider Monkey with long positions in the residential solar power company at the end of the second quarter, as compared to nine funds recorded a quarter earlier. Similarly, the overall value of those positions fell by 14% quarter-over-quarter to $13.11 million despite an increase of 15% in the value of Vivint shares. Just recently, a U.S. bankruptcy court judge rejected Vivint Solar’s request to advance its lawsuit against bankrupt renewable energy developer SunEdison stemming from their failed $2.2 billion-merger. The lawsuit was put on hold when SunEdison filed for bankruptcy protection earlier this year. Vivint Solar has lost 68% of its market value since the beginning of the year. Ken Hahn’s Quentec Asset Management reported ownership of 2.08 million shares of Vivint Solar Inc. (NYSE:VSLR) in its 13F filing for the June quarter.