Short Interest Is Soaring in GE, Fitbit, 3 More Stocks

Although there are several technical indicators out there that can give a fair idea about the future trajectory of a stock, most of them prove unreliable in the medium-to-long-term. That’s because most technical indicators are based on price and/or volume data instead of actual transactions, which makes their predictive ability fairly limited during larger time-frames. The few indicators that have predictive power to some degree and prove useful in larger time frames are usually the ones that use actual transactions to gauge the markets’ sentiment towards a stock, which includes short interest data.

At Insider Monkey, we regularly track the short interest data on U.S stocks and share our insights concerning it with our readers. In this post, we will take a look at five stocks which saw a significant increase in their short interest during the second-half of June and will discuss what hedge funds in our system thought about these stocks heading into the second quarter.

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#5 LendingClub Corp (NYSE:LC)

 – Increase in Short Interest Between June 15 and June 30: 22.14%

 – Hedge Funds with Long Positions (as of March 31): 23

 – Aggregate Value of Hedge Funds’ Holdings (as of March 31): $358.84 million

The short interest in LendingClub Corp (NYSE:LC) rose by 22.14% to cover 23.52% of the company’s float as of June 30. Shares of the online lending marketplace operator have been on a gradual decline since its IPO in December 2014 and are currently trading down by 58.45% year-to-date. In May, LendingClub Corp (NYSE:LC)’s stock slumped heavily after it announced that its founder and CEO, Renaud Laplanche, had resigned following an internal inquiry that revealed irregularities in the sale of $22 million in near-prime loans to a single investor. On June 28, hours before the company’s annual shareholder meeting, LendingClub Corp (NYSE:LC)’s Board named Scott Sanborn, who was serving as the acting CEO of the company following Mr. Laplanche’s departure, as the permanent CEO and disclosed that it will be laying off 179 employees in light of the lower loan volumes in the second quarter.

During the first quarter, the number of hedge funds in our database long LendingClub increased by five and the aggregate value of their holdings in the company jumped by $10.80 million. Funds that initiated a stake in the company during that period included Eric Semler‘s TCS Capital Management, which purchased 369,500 shares.

#4 Denbury Resources Inc. (NYSE:DNR)

 – Increase in Short Interest Between June 15 and June 30: 26.26%

 – Hedge Funds with Long Positions (as of March 31): 17

 – Aggregate Value of Hedge Funds’ Holdings (as of March 31): $56.51 million

Shares of independent oil and natural gas company Denbury Resources Inc. (NYSE:DNR) have fallen by over 25% in the past month, but are still trading up by 66% year-to-date. At the end of last month, the short interest in the company represented 22.40% of its outstanding shares. On June 29, Denbury Resources disclosed that it has agreed to sell its remaining non-core assets in the Williston Basin in North Dakota and Montana to an unnamed buyer for $58 million.

Denbury Resources Inc. (NYSE:DNR) is the only stock in this article which didn’t see an increase in its ownership among the hedge funds that we track during the first quarter, remaining unchanged. D.E. Shaw, founded by billionaire David E. Shaw, was among the hedge funds that significantly boosted their stake in the company during the first quarter, by 753% to 2.12 million shares.

We’ll check out three more stocks with ballooning short interest on the next page.

#3 Fitbit Inc (NYSE:FIT)

 – Increase in Short Interest Between June 15 and June 30: 35.12%

 – Hedge Funds with Long Positions (as of March 31): 30

 – Aggregate Value of Hedge Funds’ Holdings (as of March 31): $273.92 million

Fitbit Inc (NYSE:FIT) is another company that has lost a significant amount of its market capitalization since its IPO. Shares of the wearables manufacturer have lost over 55% of their value this year alone and are currently trading considerably lower than their IPO price of $20. During the second-half of June, when the stock made its all-time low of $11.65, the short interest in the company rose by 35.12% to cover 37.12% of its float. Leading analysts on Wall Street who cover the stock currently have fairly divergent views on it. While some of them believe that the company will find it extremely hard to survive in the hypercompetitive wearables market going forward, other analysts think that it has strong earnings growth potential. On July 15, analysts at Oppenheimer Holdings reiterated their ‘Outperform’ rating and $25 price target on the stock.

During the first quarter, the number of hedge funds in our system long Fitbit Inc (NYSE:FIT) inched up by three, but the aggregate value of their holdings in it declined by $76.65 million. Hedge funds that lowered their stake in the company during that time included Philippe Laffont‘s Coatue Management, which brought its holding down by 11% to 1.35 million shares.

#2 Cobalt International Energy, Inc. (NYSE:CIE)

 – Increase in Short Interest Between June 15 and June 30: 37.39%

 – Hedge Funds with Long Positions (as of March 31): 25

 – Aggregate Value of Hedge Funds’ Holdings (as of March 31): $429.06 million

Moving on, ownership of Cobalt International Energy, Inc. (NYSE:CIE) among the hedge funds that we cover increased by two to 25 during the first quarter, while the aggregate value of their holdings in it jumped by almost $148 million. Cobalt International Energy, Inc. (NYSE:CIE)’s stock has been declining consistently since the start of 2014 and has lost over 70% of its value this year. During late June, the short interest in the company rose by 37.39% to cover 15.74% of its outstanding shares. Following the resignation of its Chairman and CEO, Joseph Bryant, on May 31, Cobalt International Energy named Timothy Cutt as the new CEO of the company, effective June 2. James Dinan‘s York Capital Management upped its stake in the company by 34% to 95.77 million shares during the first quarter.

#1 General Electric Company (NYSE:GE)

 – Increase in Short Interest Between June 15 and June 30: 69%

 – Hedge Funds with Long Positions (as of March 31): 64

 – Aggregate Value of Hedge Funds’ Holdings (as of March 31): $5.47 billion

Digital industrial behemoth General Electric Company (NYSE:GE) witnessed a glaring 69% increase in its short interest during the second-half of June, though it still only represented 2.05% of its float on June 30. Despite such a drastic rise in the short interest, shares of General Electric Company (NYSE:GE) have performed extremely well since late-June and are currently trading close to their seven-year high. The company is expected to report its second quarter results later this week and analysts project it to report EPS of $0.46 on revenue of $31.76 billion. For the same quarter of last year, General Electric delivered EPS of $0.31 on revenue of $29.32 billion. General Electric Company’s stock currently sports an average rating of ‘Overweight’ and an average price target of $32.56 on it from the 19 leading analysts and research firms on Wall Street who track it.

During the first quarter, the number of hedge funds covered by us with long positions in the stock increased by ten, though the aggregate value of their holdings in it fell by $260 million. Billionaire Ken Fisher‘s Fisher Asset Management inched up its stake in the company by 1% to 31.31 million shares during the second quarter.

Disclosure: None