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Top Nasdaq Short Squeeze Plays for February - 4127 views
The choppiness of the Nasdaq continues. In the last 12 months, the index has traded as high as 2,551, and it is now at 1,591.7. With the low prices on numerous Nasdaq stocks, and many of these stocks being heavily shorted, it's a good time for short-squeeze opportunities.
A short squeeze takes place when short sellers quickly cover their positions on optimistic news, which can move the price of the stock up sharply. The metric for measuring short-squeeze opportunities is the short ratio, which is the number of days it would take the short-sellers to cover their positions based on recent average daily volume.
Stockpickr has reviewed the heavily shorted Nasdaq stocks and compiled a list of the Top Nasdaq Short-Squeeze Plays for February.
One heavily shorted Nasdaq stock is School Specialty (SCHS), a supplier of supplemental educational products and equipment to the K-12 market. Its short ratio is an amazingly high 36, which means that it would take 36 days for the short-sellers to cover their positions based on recent trading volume. The company’s fiscal 2009 third-quarter earnings conference call is planned for Thursday, Feb. 19. School Specialty has $9.6 million in cash and $448 million in debt. At $16.60, the stock is a selling at a huge discount to its book value of $27.92. It doesn't pay a dividend, but it generates $88.5 million in operating cash flow.
Michael Dell's largest stockholding is School Specialty, which is owned through his investment arm MSD Capital. Dell, the founder of Dell Computer (DELL), was the youngest CEO ever to earn a ranking on the Fortune 500. Other stocks he favors include Wright Express (WXS), with a short ratio of 5.1; Tyler Technologies (TYL), with a high 18.2 short ratio; and Dineequity (DIN), with a 10.5 short ratio.
Another heavily shored Nasdaq stock is Mobile Mini (MINI), a provider of portable storage products and solutions. Its short ratio is an extremely high 42.5. The company's fourth-quarter is scheduled for Thursday, Feb. 26. Its balance sheet shows cash of $17.8 million, with $941 million in debt. At $11.79, the stock is selling at a big discount to its book value of $15 per share. Operating income is $88.8 million, and Mobile Mini doesn't pay a dividend.
Moble Mini is owned by the T. Rowe Price New Horizons Fund, which has a Morningstar rating of three stars and is managed by John Laporte. The fund ranks in the top 20% for the last five years in its category of small growth funds. It also owns Henry Schein (HSIC), with a short ratio of 4.6; Nii Holdings Inc (NIHD), with a 2.8 short ratio; and FMC Technologies (FTI), with a 2.3 ratio.
For a complete list of the top Nasdaq short-squeeze plays for the month, including four stocks with short ratios above 40, visit Stockpickr.
Posted on Feb. 8, 2009