Short Sellers Flee Weak Companies

Short sellers must believe that, if the market rises, shares of weak companies will go along. Their positions in stocks that should drop due to their recent financial statements, and in some cases historical results, largely declined for the period that ended on October 15.

The short interest in Sirius XM Radio Inc. (NASDAQ: SIRI) dropped 5% to 275 million shares. The turmoil around the company may completely change its ownership. CEO Mel Karmazin is leaving. But the stock has hovered near one price for weeks.

The number of professionals who believe the Microsoft Corp.’s (NASDAQ: MSFT) Windows 8 launch and the release of its Surface tablet will not help the world’s largest software firm probably outnumber those who are optimistic. Microsoft’s recent weak quarter shows how vulnerable it would be to a failure of Windows. But the short interest in Microsoft fell 10% to 93 million.

The short interest in Groupon Inc. (NASDAQ: GRPN) fell 18% to 32 million shares. Wall St. has not been able to figure out how Groupon can sustain a viable business, and the number of competitors that have followed it into the online coupon business is huge.

Shares short in Yahoo! Inc. (NASDAQ: YHOO) fell 5% to 25 million despite ongoing worries that it cannot get a foothold in the important mobile world. The short interest in Monster Beverage Corp. (NASDAQ: MNST) dropped 21% to 3 million. The company faces questions about the safety of its products.

Among NYSE traded stocks, the short interest in Nokia Corp. (NYSE: NOK), which may not survive its sales downturn, fell 3% to 294 million. The short interest in Bank of America Corp. (NYSE: BAC), which seems to tangle with the federal government at least once a week, fell slightly to 191 million at a point when the stock is at extreme risk of slipping.

Shares short in Ford Motor Co. (NYSE: F), its earnings threatened by trouble in Europe, dropped 9% to 142 million. The short interest in Procter & Gamble Co. (NYSE: PG), which has such trouble that its CEO could be ousted, fell 20% to 19 million. Investors may believe someone new can solve the company’s problems. Shares short in Xerox Corp. (NYSE: XRX), which has lost the race to move its products into the digital world, fell 12% to 41 million.

There were a few notable situations in which short interest grew. Among the most obvious candidates for short selling is Hewlett-Packard Co. (NYSE: HPQ). Shares short in the company’s stock rose 20% to 99 million. Shares short in JCPenney Co. Inc. (NYSE: JCP), the most troubled of the large retailers, rose 5% to 60 million.

And, predictably, shares short in Research In Motion Ltd. (NASDAQ: RIMM) were up by 9% to 95 million.

Data from NYSE and Nasdaq.

Douglas A. McIntyre