The bears are growling on Wall Street.
There’s no shortage of shorts out there. Even the steadiest of blue chips attract shorts, drawing speculators who make money on falling stock prices.
I like to check on the market’s most shorted companies from time to time. It’s been nearly two months since the last time I checked in on the companies with the most shares sold short.
It’s not a perfect art. Naturally, the list is full of stocks with huge market caps. Other common traits here are a large sum of outstanding shares and low share prices.
Let’s dive back in by checking out the companies with the largest number of shares sold short as of the end of February.
| Company | Feb. 28 | Dec. 31 |
|---|---|---|
| Sirius XM Radio Inc (NASDAQ:SIRI) | 414.0 million | 355.4 million |
| Nokia Corporation (ADR) (NYSE:NOK) | 338.0 million | 291.7 million |
| Frontier Communications Corp (NASDAQ:FTR) | 227.6 million | 212.5 million |
| Intel Corporation (NASDAQ:INTC) | 216.0 million | 215.5 million |
| Bank of America Corp (NYSE:BAC) | 161.3 million | 186.6 million |
Source: Barron’s.
Feeding the bears
An interesting point is that the top five names remain unchanged as of mid January. There is usually some movement and rotation, but there was none of that this time. It also bears pointing out that all but Bank of America have seen the number of shares sold short increase during the first two months of the year despite the rallying market.
Sirius XM Radio Inc (NASDAQ:SIRI) is at its highest level of shorting activity over the past year. It doesn’t seem to matter that the company is coming off another strong quarter. Robust auto sales will also continue to drive subscriber acquisitions higher, and that’s important for this scalable model with 23.9 million subscribers.
Nokia Corporation (ADR) (NYSE:NOK)’s been a volatile stock. The mobile handset pioneer has more than doubled since bottoming out this past summer, but the shares have been sliding since peaking at $4.90 in January. Nokia has had a fair amount of success with its Lumia smartphones, and it’s being rewarded handsomely by Mr. Softy to back the Windows Phone platform.
Frontier Communications is among the regional telcos attracting income investors with their beefy payouts. Frontier’s 10% yield is a magnet for longs — and a challenge for shorts — but the naysayers are gravitating to Frontier as providing phone, Internet, and television services in underserved rural markets falls out of favor. Free cash flow at Frontier declined 13% last year, though that’s still more than enough to cover its distributions given a rate cut last year.
Intel Corporation (NASDAQ:INTC) is the chip giant that owns the microprocessor space. Intel is trading closer to its low than its high, as PC sales shrink and Intel battles to matter in the “good enough” mobile computing devices that are replacing traditional desktops and laptops. Intel Corporation (NASDAQ:INTC)’s healthy yield of 4.2% also makes it a dangerous short.
Finally, we have Bank of America. The “too big to fail” banking giant finally cleared its stress test earlier this month, celebrating by announcing a massive share buyback. As the economy improves — and the housing market firms ups — being a banker may not be an unloved line of work anymore.
Waiting is the hardest part
All five of these companies have their challenges, but it’s not as if any of them are going away anytime soon. Analysts see Frontier and Nokia Corporation (ADR) (NYSE:NOK) posting declines in revenue this year, but we’re talking about marginal steps back.
Shorting these five companies doesn’t seem like a bright idea, but it would be a boring marketplace if everyone were bullish.
The article 5 Stocks That You Love to Hate originally appeared on Fool.com and is written by Rick Munarriz.
Longtime Fool contributor Rick Munarriz owns shares of Bank of America. The Motley Fool recommends Intel. The Motley Fool owns shares of Bank of America and Intel.
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