Karl Looms Shares 6 Stocks Poised For A Short Squeeze

SunGard's Astec Analytics looks into short-selling activity weekly.

This week’s top pick, from a securities lending perspective, was American International Group Inc AIG, which has been falling over the past few days.

Other stocks that that saw plenty of short-selling activity included GoPro Inc GPRO, Chesapeake Energy Corporation CHK, Weight Watchers International, Inc. WTW, Fitbit Inc FIT and MannKind Corporation MNKD

SunGard's Astec Analytics delivers intraday short-selling market data via securities lending analytics. In a report recently sent out to clients, the firm shared a “roundup of some of the hottest stocks from a securities lending perspective.”

Here's a look at Karl Loomes’ list of top stocks in the Americas from a security lending perspective

American International Group

The U.S. insurer was the firm’s top pick for the Americas this week following activist investor Carl Icahn’s exhortation to break up the company, arguing that its CEO is “void of decisive leadership.”

The hedge fund manager also said he had accumulated a “large stake” in the large-cap company. Consequently, he began his “attack” on the management just one week ahead of its earnings call. However, Loomes continued, the news of his holdings managed to outweigh his sayings about the breakup of the company.

“AIG’s shares made decent gains in the cash market during the week, though there were also signs of short sellers building positions since mid-October, with borrowing volumes up 46 percent over the past two weeks,” the report added.

GoPro

Moving up one spot this week was GoPro, which rose in the list after announcing its third quarter financial results – below expectations. The numbers led to a a 14 percent sell off in the shares.

Loomes expounded, “With borrowing volumes already near their limits – utilization pushing over 98 percent – it was the cost of borrowing that got squeezed during the week as short sellers were seemingly trying to snap up any shares they could. In Friday’s session alone, the cost of borrowing GPRO shares climbed from about 11 percent to almost 19 percent.”

Chesapeake Energy

Chesapeake is another regular in Astec’s list –also moving up. This week, the company was once again in the spotlight after announcing its latest preferred dividend, “though official figures showing broader oil production cuts in south Texas – a key market for Chesapeake – also took their toll,” Looms explicated.

“That said, the company’s cash market trading was fairly mixed in the wake of the news, though on the borrowing front the market seemingly picked up,” he continued. Roughly nine million extra shares were borrowed over the week.

Weight Watchers International

Falling two places in the list was Weight Watchers. Short sellers are apparently changing their minds after the massive 200 percent surge in the price of the stock, triggered by Oprah Winfrey’s new 10 percent stake in the company.

Astec explained that, “Though this side of the market initially seemed to be betting that the ‘Oprah Effect’ resulted in overbought shares, since the move borrowing volumes have not only pared these gains but now dropped below their previous levels to their lowest point since June.” As is, the number of shares being borrowed fell roughly 30 percent from the peak reached in the previous week and approximately 12.5 percent versus pre-Oprah levels.

Fitbit

In at the fourth spot this week, Fitbit saw renewed focus after announcing a partnership with Genuine Thermos brand, aimed at creating a new “connected bottle that will allow users to track hydration levels.”

On the securities lending arena, Astec’s data suggests “availability is being squeezed once again for this popular short-selling stock, with utilization pushing the 100 percent mark. The 41 percent borrowing cost is one of the highest on the system,” the research note assured.

MannKind

Maintaining its position from last week was MannKind, which continued to be in the spotlight due to the decline in its share price, following the announcement of the end of a stock lending agreement with Bank of America Corp BAC.

This has also seemingly led to consistent short covering, nonetheless, with borrowing volumes down six percent in the past couple of weeks.

Disclosure: Javier Hasse holds no positions in any of the securities mentioned above.