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Top NYSE Short-Squeeze Plays for December - 7422 views
These days, when you see a sharp rise in the stock market, you can't necessarily attribute it to the bullishness of investors. There's a good chance it's due to short-covering or a short squeeze.
A short squeeze takes place when short-sellers quickly cover their bearish 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, also known as the "days-to-cover ratio," which is the number of days it would take the short-sellers to cover their positions based on recent average daily volume of the stock.
Stockpickr has reviewed the heavily shorted New York Stock Exchange stocks and developed a list of the top NYSE short-squeeze plays for the month of December.
One of the stocks with a very high short ratio is First Bancorp (FBP), the bank holding company for FirstBank Puerto Rico, which serves customers in Puerto Rico, the U.S. and the British Virgin Islands. The stock has a short ratio of 21, which means that it would take 21 days for the short-sellers of this stock to cover their positions, based on the recent daily trading volume.
The company was upgraded to hold by TheStreet.com Ratings back in September, primarily due to increasing cash flow from operations and profit margins. In addition, the company's net earnings have been increasing. The stock has a P/E of 17, which is much better than its banking competitor in Puerto Rico, Santander Bancorp (SBP), which has a P/E of 44. First Bancorp has a PEG of 1.46, also much better than Santander's PEG of 3.23. The yield on First Bancorp is 2.8%.
First Bancorp is owned by the Schneider Small Cap Value Fund, a long-term capital growth fund that invests primarily in smaller-cap companies. The fund is rated three stars by Morningstar and has been up in seven out of the last nine years. Schneider also owns Anworth Mortgage Asset (ANH), with a short ratio of 2.8; Huntington Bancshares (HBAN), with a 7.6 short ratio; and NVR (NVR), which has a 6.5 ratio and is one of the highest-priced stocks, selling for more than $460 per share.
Another very heavily shorted NYSE stock is Imation (IMN), which makes and markets removable data storage media products. The stock has a short ratio of 19.1. Its tiniest flash drive, called the Atom, received the Editors' Choice Honors from Computer Shopper magazine. The Atom is about as long as a paperclip. The stock has a forward P/E of 19 and a PEG of 1.47. It pays a yield of 2.6%.
Imation is favored by Arnold Van Den Berg, who founded Van Den Berg Management in 1974 and has returned a compound annual return of 15.6% over the last 30 years. Van Den Berg also likes Wal-Mart Stores (WMT), with a short ratio of 1.7; 3M (MMM), with a short ratio of 1.3; and Wells Fargo (WFC), with a 1.5 short ratio.
For more ideas, check out the portfolio of top NYSE short-squeeze plays for December at Stockpickr.com.
Posted on Dec. 18, 2008