Shorts Are Piling Into These Stocks. Should You Be Worried?: Plains All American Pipeline, L.P. (PAA), Sprint Nextel Corporation (S)

I still can’t hear you
SoftBank may have taken the wind out of pessimists’ sails with its $20 billion investment in Sprint Nextel, giving it a controlling 70% stake; however, it forgot one key point: that it just purchased a stake in Sprint Nextel.

There’s a reason that Sprint Nextel has been left in the dust by peers AT&T Inc. (NYSE:T) and Verizon Wireless (co-owned by Verizon Communications Inc. (NYSE:VZ) and Vodafone Group Plc (ADR) (NASDAQ:VOD)): a lack of 4G LTE infrastructure. According to Verizon Wireless’ coverage map (I know, bias alert), it boasts 476 cities that are covered by its 4G LTE compared to just 125 for AT&T as noted by C-Net in mid-December. As for Sprint, it offers 4G LTE service in just 49 cities. Game-set-match!

Another big problem with Sprint is that it’s never had enough capital, or the right partner, to expand its 4G LTE network until now. One of Sprint’s biggest financial black holes has been Clearwire Corporation (NASDAQ:CLWR) , which, other than its amazing spectrum assets, has burned a hole in Sprint’s pocketbook. Clearwire’s WiMax technology was passed over by Sprint for 4G LTE and, even after funneling Clearwire more than $1.5 billion in lifelines, Sprint still tried to look elsewhere (a la LightSquared) for an LTE build-out partner. Instead, Sprint actually agreed to purchase Clearwire, a company that burned through $9.3 billion in free cash between 2007 and 2011, for $2.2 billion. DISH Network Corp. (NASDAQ:DISH) currently has a competing and superior bid for Clearwire, but Sprint may ultimately land this cash-burning machine. That’s more than enough reason to avoid Sprint, in my opinion.

Foolish roundup
This week’s theme is all about bigger trends than just the companies examined. A large influx of newly insured patients and a large midstream build-out bode well for UnitedHealth Group and Plain All American. Conversely, Verizon’s 4G LTE dominance and AT&T’s superior cash flow continue to put Sprint at a clear disadvantage.

What’s your take on these three stocks? Do the short-sellers have these stocks pegged, or are they blowing smoke? Share your thoughts in the comments section below.

The article Shorts Are Piling Into These Stocks. Should You Be Worried? originally appeared on Fool.com and is written by Sean Williams.

Fool contributor Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.The Motley Fool owns shares of WellPoint. Motley Fool newsletter services have recommended buying shares of UnitedHealth Group, WellPoint, and Vodafone Group, as well as creating a diagonal call position in UnitedHealth Group.

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