The trend among short sellers for the last two months is that they gamble against shares in the weakest public companies. Perhaps they sense that an economic downturn or U.S. debt default will undermine whatever recovery prospects these companies have.
Short interest data for the period that ended July 15 show that short sellers have doubled down on positions in many companies.
The short position in what is arguably the weakest large financial firm in the U.S., Bank of America (NYSE: BAC), rose 15% to 124.9 million shares. Holders are still worried that the bank’s mortgage portfolio could undermine its earnings for several more quarters.
Short sellers also moved more heavily into weak tech stocks. Shares short in AMD (NYSE: AMD), a company that has been without a CEO for half a year, rose 24% to 103.4 million. The short interest in Eastman Kodak (NYSE: EK), which recently reported poor earnings and may no longer be a viable company, rose 20% to 73.6 million. Shares sold short in Sprint-Nextel (NYSE: S) rose 22% to 99.1 million. Many investors believe that the wireless company’s flimsy prospects will be further damaged by the AT&T (NYSE: T) buyout of T-Mobile. The short interest in Motorola Mobility (NYSE: MMI) rose 19% to 25.1 million as its smartphone sales have become threatened by larger competitors such as Apple (NASDAQ: AAPL), HTC, and Samsung.
Short sellers also added to positions in companies that are threatened by the erosion of PC sales due to the movement of personal technology activity to portable wireless devices. Shares short in Intel (NASDAQ: INTC) rose 27% to 119.8 million. The short interest in Microsoft (NASDAQ: MSFT) rose 20% to 75.1 million. Shares short in Dell (NASDAQ: DELL) moved higher by 3% to 81 million.
Shares sold short in the perceived laggards in the tech sector also rose. The short position in Cisco (NASDAQ: CSCO) was higher by 19% to 71.2 million. Shares sold short in Research In Motion (NASDAQ: RIMM) rose 8% to 30.7 million.
Douglas A. McIntyre
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