5 Huge Short Selling Surprises (BAC, FSLR, NFLX, SHLD, YHOO)

Twice a month we get to dig through the endless short selling and short interest data released by the NASDAQ and NYSE.  There are almost always some huge surprises in there and many seem counter-intuitive on the surface.  We found 5 anomalies in the September 30 settlement date short interest data in shares of Bank of America Corporation (NYSE: BAC), First Solar, Inc. (NASDAQ: FSLR), Netflix, Inc. (NASDAQ: NFLX), Sears Holdings Corporation (NASDAQ: SHLD), and in Yahoo! Inc. (NASDAQ: YHOO). We have added color on each.

Bank of America Corporation (NYSE: BAC) is still running at very high nominal short interest and is still about twice the normal level from earlier in the year.  Still, this September 30 settlement date showed a drop after seven consecutive short interest hikes by the bears.  It may be too soon to say that a short selling climax has been seen.  It is also hard to get excited to say “only 204 million shares were short” in a beaten up stock. Shares went lower into the start of October but now we are back close to where the trade dates would have been in share prices under $6.50.

First Solar, Inc. (NASDAQ: FSLR) has gone down the proverbial drain.  The new mantra for investors is “Solar sucks!”  Things have gone from bad to worse and the stock is now down about 65% from its 52-week high.  At some point we would expect that short sellers will lighten up as the value gets to be ridiculously cheap even for a company where margins are compressing.  Still, the 20.335 million listed in the short interest based upon a September 30 settlement date was the highest since June 30.  Short sellers have pressed their bets here, and they are still winning on those bets if the have stuck with it.

Netflix, Inc. (NASDAQ: NFLX) has lost its was and has become a broken stock.  After losing close to the two-thirds of its value those short sellers who were in pain daily on the way up were finally proven to be right.  What is interesting is that the short interest on September 30 was down to 8.101 million shares.  This was lower than the 9.56 million reported in mid-September, but what is shocking is that the short interest was the lowest in total share count and in days to cover (at 1.0) than it has been in a year.   Maybe the short sellers have stopped pressing their bets!

Sears Holdings Corporation (NASDAQ: SHLD) may have seen a huge bounce in the last few trading sessions and now is almost 40% above its 52-week lows just seen in late September.  The shorts were pressing their bets in September and they better hope like hell that they covered before the rip higher.  The September 30 settlement date short interest was up above 12 million shares for the first time since last December.  The only good news is that this was lower on a days-to-cover basis at 16.8 days. 

Yahoo! Inc. (NASDAQ: YHOO) has scared the you know what out of short sellers.  They have abandoned ship due the possibility of a buyout, break-up, or reorganization.  The September 30 reading was down to 41.224 million shares on the September 30 settlement.  That was down from a year high of almost 65.9 million shares just two weeks earlier and this short interest is now the lowest for all of 2011.  Did those short sellers find out about better possibilities of a deal headed the way of Yahoo!?

JON C. OGG