Oracle Corporation (NASDAQ:ORCL)
Oracle is another mega-cap on our list; the technology company saw its short interest jump by 44% in the first two weeks of January. Unlike the previous two companies we’ve discussed, Oracle doesn’t report its current-quarter earnings until March. Oracle’s stock price is up more than 6% since the start of 2013, and it’s backed by several prominent money managers including Boykin Curry, Seth Klarman and Ken Fisher (see Ken Fisher’s favorite key picks). The market has been optimistic about Oracle’s pending acquisition of marketing software company Eloqua (ELOQ), and shares don’t look too overbought at current levels. Oracle trades at 16.7 times trailing and 12 times forward EPS, but the sell-side expects earnings growth to slow dramatically over the coming years.
The company has averaged bottom line expansion of 19.3% a year over the past half-decade; early estimates predict Oracle to experience annual EPS growth of 11.8% through 2017. Moreover, Wall Street’s average price target on the stock represents an upside of around 5%, which is below peers like Intel (INTC) (8.8%) and Red Hat (RHT) (8.7%). It’s possible that short-sellers are focusing on these issues.
Chevron Corporation (NYSE:CVX)
Next up we have Chevron, which saw its short interest increase by nearly 14% through January 15th. Chevron’s next earnings report is at the end of this week, and it’s likely that this bearish activity is in anticipation of this event. The sell-side is expecting Chevron to experience impressive year-over-year revenue (8.8%) and EPS (17.8%) growth over the period, and at a PEG above 9, it’s conceivable that investors are already factoring these expectations into the stock’s price.
Merck & Co., Inc. (NYSE:MRK)
Last but certainly not least, Merck makes this list after seeing a 21.7% increase in its short interest in the first two-week period of January. The healthcare giant is looking to make its FY2012 a perfect four-for-four in terms of EPS beats; it has outpaced the Street’s estimates by an average margin of 2.4% this year and reports its Q4 earnings at the end of this week.
On a P/E basis, shares of Merck currently trade at a 14.5% premium to the (major) drug manufacturing industry’s average, so there’s a case to be made that the stock is slightly overbought. Still, a projected dividend yield near 4% gives value-conscious investors a bit of a security blanket, so it’s easy to see both sides of the argument in this case.
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Disclosure: I hold no positions in any of the stocks mentioned in this article
