Short Interest Jumped Big Time In These 5 Stocks This Month

With many hedge funds short as many stocks as they are long and accounting for large ownership percentages of many stocks, the change in short interest for a stock is often as good of an indicator of hedge fund sentiment as 13F filings are, with the added benefit of being even more up-to-date.

In this article, we’ll take a closer look at five stocks that have seen short interest in their shares surge from July 29 to August 15. They are Cedar Realty Trust Inc (NYSE:CDR), Lockheed Martin Corporation (NYSE:LMT), Vail Resorts, Inc. (NYSE:MTN), QEP Resources Inc (NYSE:QEP), and Carter’s, Inc. (NYSE:CRI). We’ll also use the latest 13F filings to see how the collection of top hedge funds in our database were trading long positions in the five stocks during the latest quarter.

While there are many metrics that investors can assess in the investment process, the hedge fund sentiment is something that is often overlooked. However, hedge funds and other institutional investors allocate significant resources while making their bets and their long-term focus makes them the perfect investors to emulate. This is supported by our research, which determined that following the small-cap stocks that hedge funds are collectively bullish on can help a smaller investor to beat the S&P 500 by around 95 basis points per month (see the details here).

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#5 Carter’s, Inc. (NYSE:CRI)

– Number of Hedge Fund Shareholders (as of June 30): 38
– Total Value of Hedge Funds’ Holdings (as of June 30): $1.33 billion
– Hedge Funds’ Holdings as Percent of Float (as of June 30): 24.50%

Apparel maker Carter’s is on our list primarily due to its second quarter earnings report. Although the company’s second quarter results soundly beat estimates for both the top- and bottom-lines, Carter’s full-year guidance was weaker than expected. The company’s management cut its EPS growth forecast to 10% versus the previous 10%-to-12% range, while its revenue growth expectations were cut to 5%-to-6% versus the previous range of 6%-to-7%. Although short interest in Carter’s, Inc. (NYSE:CRI) spiked to 1.32 million shares from 709,701 shares from July 29 to August 15, our data shows that hedge funds are still bullish on the stock. The 1.32 million shares on borrow account for approximately 2.7% of the float, while the cumulative long positions held by the hedge funds that we track accounted for 24.5% of the float at the end of June.

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#4 QEP Resources Inc (NYSE:QEP)

– Number of Hedge Fund Shareholders (as of June 30): 34
– Total Value of Hedge Funds’ Holdings (as of June 30): $489.82 million
– Hedge Funds’ Holdings as Percent of Float (as of June 30): 12.80%

Despite the rally in the stock, short interest in QEP Resources Inc (NYSE:QEP) climbed to 10 million shares in the middle of August from 5.37 million shares on July 29. Those 10 million shares account for 4.2% of the float, versus the 12.8% of shares that were held by the funds in our system at the end of June. If WTI prices continue surging like they have since the beginning of the month, the long investors will win out. If WTI prices retreat and stay lower for longer on the other hand, investor enthusiasm for all things Permian will wane and the shorts will profit. Jim Simons‘ Renaissance Technologies cut its position in QEP Resources by 52% in the second quarter, to just under 1.2 million shares.

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On the next page we’ll go through three more stocks with burgeoning short interest, that investors may want to keep an eye on.

#3 Vail Resorts, Inc. (NYSE:MTN)

– Number of Hedge Fund Shareholders (as of June 30): 33
– Total Value of Hedge Funds’ Holdings (as of June 30): $465.16 million
– Hedge Funds’ Holdings as Percent of Float (as of June 30): 9.30%

Investors became a little more cautious on Vail Resorts, Inc. (NYSE:MTN) in the first half of August, as the total shares short the stock rose by 87.1% to 985,746 shares, or 2.8% of the float. Some funds may have taken a short position due to Vail Resort’s acquisition of Whistler Blackcomb Holdings for CAD$17.50 per share (or USD$13.45) and 0.0975 shares of Vail, on August 8. Although the acquisition might pay off in the long-run, it isn’t guaranteed to deliver in the short term and the deal makes Vail a tad riskier.

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#2 Lockheed Martin Corporation (NYSE:LMT)

– Number of Hedge Fund Shareholders (as of June 30): 39
– Total Value of Hedge Funds’ Holdings (as of June 30): $1.19 billion
– Hedge Funds’ Holdings as Percent of Float (as of June 30): 1.60%

Short interest in Lockheed Martin Corporation (NYSE:LMT) surged by 170.6% to 36.79 million shares by the middle of August, good for 12.2% of the defense maker’s float. Meanwhile, the shares held in long position by the funds in our system only amounted to 1.6% of Lockheed’s float at the end of June. Investors could be shorting the stock due to valuation purposes. With a forward P/E of 19, Lockheed isn’t exactly cheap and Lockheed’s earnings results could disappoint if its F-35 program runs into more trouble.

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#1 Cedar Realty Trust Inc (NYSE:CDR)

– Number of Hedge Fund Shareholders (as of June 30): 6
– Total Value of Hedge Funds’ Holdings (as of June 30): $22 million
– Hedge Funds’ Holdings as Percent of Float (as of June 30): 3.50%

With 7.97 million shares short on August 15, versus 2.53 million shares short on July 29, Cedar Realty Trust Inc (NYSE:CDR) is number one on our list in terms of short interest spikes. Due to the 214.6% short increase, 10.2% of Cedar Realty Trust’s float is short, versus 3.5% of the float that was being held in long positions on June 30 among the hedge funds in our database. Cedar Realty reported FFO of $0.15 per share on revenue of $37.87 million for the second quarter, up by 7% and 3.1% respectively year-over-year.

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Disclosure: None