Investors Are Shorting the Heck Out of These NYSE Stocks

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.

#4. RPC Inc. (NYSE:RES)

– Short Interest Ratio: 47.6%

– Investors with Long Positions (as of June 30): 20

– Aggregate Value of Investors’ Holdings (as of June 30): $218.93 Million

Short interest for RPC Inc. (NYSE:RES) rose by 1.73 million shares during the two-week period that ended August 31 to 27.64 million shares, which represented 47.5% of the total float. At the most recent average daily volume, it would take approximately 23 days to cover all short positions. There were 20 smart money investors from our database invested in RPC both at the end of the first and second quarter. However, the aggregate value of those investors’ equity investments in RPC increased by 25% quarter-on-quarter to $218.93 million, partially due to a 9% increase in the value of the company’s stock. The provider of oilfield services to independent and major oilfield companies engaged in the exploration, production and development of oil and gas properties has seen its market capitalization jump by 22% since the start of the year. In the second quarter of 2016, the company’s revenues fell by 51.9% year-over-year to $143.0 million, primarily reflecting lower activity levels and pricing for its services. Ken Griffin’s Citadel Advisors LLC trimmed its position in RPC Inc. (NYSE:RES) by 20% during the April-to-June quarter to 1.17 million shares.

#3. EP Energy Corp (NYSE:EPE)

– Short Interest Ratio: 49.9%

– Investors with Long Positions (as of June 30): 13

– Aggregate Value of Investors’ Holdings (as of June 30): $47.36 Million

Up-to-date short interest data reveals a decrease of 921,527 shares in short interest for EP Energy Corp (NYSE:EPE) to 18.82 million shares, with the company’s short interest as a percentage of its float standing at a worrying 49.9% at the end of August. Meanwhile, the independent exploration and production company engaged in the acquisition and development of unconventional onshore oil and natural gas properties has received some attention from the segment of the hedge fund industry monitored by Insider Monkey, as the number of asset managers with stakes in EP Energy climbed to 13 from 10 during the second quarter. Nonetheless, the overall value of those stakes fell by 12% quarter-over-quarter to $47.36 million despite a 14% gain in the value of EP Energy’s shares. The company’s total physical sales for the six months that ended June 30 dropped by 44% year-on-year to $387 million, mainly due to lower commodity prices across all commodity types as well as lower oil volumes as a result of the slowed pace of development in its drilling programs. Neil Chriss’ Hutchin Hill Capital acquired a new stake of 208,900 shares of EP Energy Corp (NYSE:EPE) during the June quarter.

#2. Pure Storage Inc. (NYSE:PSTG)

– Short Interest Ratio: 49.9%

– Investors with Long Positions (as of June 30): 14

– Aggregate Value of Investors’ Holdings (as of June 30): $101.75 Million

The number of Pure Storage Inc. (NYSE:PSTG) shares short rose by 4.3% in the second half of August to 19.40 million shares. The company’s short interest as a percentage of its float stands at a nerve-racking 53.2% as of August 31. Meanwhile, the hedge fund sentiment towards the data flash storage company remained unchanged during the second quarter at 14 (the number of funds invested in the company). However, the overall value of “smart money” equity stakes in the company declined by 33% quarter-over-quarter to $101.75 million, mainly reflecting a fall of 22% in the value of Pure Storage shares. In late August, analysts at Oppenheimer upgraded Pure Storage to ‘Outperform’ from ‘Perform’, saying that they are “bullish on Pure’s progress toward cash flow break-even and profitability, and its ability to capitalize on differentiated technology, AFA [all-flash array] growth, and on expansion opportunities with new products, new customers, and internationally.” Pure Storage’s stock is 11% in the red thus far in 2016. Philippe Laffont’s Coatue Management had 148,157 shares of Pure Storage Inc. (NYSE:PSTG) among its holdings at the end of June.

#1. Adeptus Health Inc. (NYSE:ADPT)

– Short Interest Ratio: 54.4%

– Investors with Long Positions (as of June 30): 24

– Aggregate Value of Investors’ Holdings (as of June 30): $307.27 Million

On August 31, Adeptus Health Inc. (NYSE:ADPT)’s short interest as a percentage of its float was a whopping 54.4%. Adeptus Health’s short interest decreased by around 2% during the second half of August to 7.15 million. The patient-centered healthcare organization providing emergency medial care has seen its market value plunge by 26% since the beginning of 2016. There were 24 hedge fund firms from our system with long positions in Adeptus Health at the end of June, as compared to 25 recorded at the end of March. Despite the fall in the number of funds invested in Adeptus and the 7%-decrease in the value of Adeptus shares, the aggregate value of those positions rose by 40% quarter-over-quarter to $307.27 million. The company’s system-wide net patient services revenue for the six months that ended June 30 increased by 50.0% year-on-year to $282.7 million, mainly due to increased patient volumes from the expansion of the number of freestanding facilities, annual gross charge increases and sustained growth of its hospitals and their hospital outpatient departments in Arizona and Texas. James E. Flynn’s Deerfield Management owns 1.60 million shares of Adeptus Health Inc. (NYSE:ADPT) as of June 30.

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