Short interest usually gives investors a sense of how pessimistic or bearish market participants are toward a particular company’s stock. Short interest represents the number of shares of a particular stock that bearish traders and investors have sold short but not yet covered. Hence, if the overall short interest of a stock declines, it means that some traders who previously shorted the stock have covered their short positions.
Generally, there are two primary reasons short sellers may want to cover their short positions. First, short sellers may seek to limit losses amid a stock price rally. And second, they may want to lock in profits amid a massive drop in a stock’s share price. Either way, the level of short interest on individual equities represents a very efficient and accurate method for measuring investor sentiment. As a result, if the short interest of a stock declines meaningfully, the motives behind short sellers’ decision to short in the first place may be cooling off. That said, the following article will lay out a list of five Nasdaq stocks that saw their short interest decline massively in the second half of June.
Through extensive research, we determined that imitating some of the picks of hedge funds and other institutional investors can help generate market-beating returns over the long run. The key is to focus on the small-cap picks of these investors, since they are usually less followed by the broader market and are less price-efficient. Our backtests that covered the period between 1999 and 2012, showed that following the 15 most popular small-caps among hedge funds can help a retail investor beat the market by an average of 95 basis points per month (see more details here).
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#5. LivaNova PLC (NASDAQ:LIVN)
– Change in short interest in the period of June 15-June 30: -53.8%
– Investors with long positions as of March 31: 23
– Aggregate value of investors’ holdings as of March 31: $481.68 Million
The most recent short interest data show a 1.13 million share-decrease in total short interest for LivaNova PLC (NASDAQ:LIVN) in the second half of June to 967,445 shares. There were 23 hedge fund vehicles followed by Insider Monkey with long positions in LivaNova at the end of March, up from 20 registered at the end of the four quarter of 2015. Nonetheless, the overall value of those positions fell by 23% quarter-over-quarter to $481.68 million, partially due to a 9% decline in the value of LivaNova shares. The global medial device company headquartered in London has seen its market value plunge by 14% thus far in 2016. A blind guess would be that the short interest declined as worries related to the uncertainty and consequences that may flow from the Brexit vote are diminishing. The medial technology and innovation company recorded worldwide sales of $287 million for the first quarter of 2016, up 3.0% year-over-year on a constant currency basis. Ken Fisher’s Fisher Asset Management owns 52,000 shares of LivaNova PLC (NASDAQ:LIVN) as of June 30.
