Traders work on the floor of the New York Stock Exchange.
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5. Pfizer (PFE) may be the best proxy for the fortunes of large U.S. pharmaceutical companies. It has a market cap of more than $88 billion and annual revenue of almost $50 billion, making it the largest drug company in the world. It is in the midst of buying rival Wyeth for $68 billion and is cutting staff and costs rapidly as some of its most profitable drugs lose their patent protections, a problem across the entire industry. Pfizer has a short interest of almost 174 million shares. and average daily trading volume of 54 million shares. Pfizer traded at over $17 at the beginning of the year, fell to $11.62 at the beginning of March and has recovered to $13.17 since then.
6. Gannett (GCI) is the largest newspaper company in the U.S. which makes it the subject of constant speculation and financial media interest. Its short interest as of April 15 was 63.8 million shares, down 7% from two weeks earlier. The company has a very high 28% of its float sold short, which is equivalent to six trading days of volume based on the current daily average. As concerns about the fate of the newspaper industry mounted, Gannett's shares plunged from over $9 in mid-January to $1.85 in mid-March. Two weeks ago, Ariel Investments announced that it had increased its investment in Gannett from 4.8% of the company to 12.5%. That puzzled Wall St because of the bleak future the industry faces. The news about Ariel caused the stock to rally from $2.69 to $4.06 in four days, which probably pushed a number of short sellers out. Weak earnings knocked the stock back down to $3.09 giving those gambling against the firm some renewed hope.
7. Sirius XM (SIRI) has been a favorite of short sellers for years. Once considered among the most promising growth stocks in America, its debt problems nearly forced it into Chapter 11. Liberty Media put $530 million into the satellite radio company just days before it would probably have gone bankrupt and got 40% of Sirius and along with debt for the capital. The company's stock began the trading year at $.12 and fell to $.05 in early February on concerns that it might fold. Since then, the shares are up over 8x to $.43. There were almost 167 million shares sold short in Sirius as of April 15, down 8% from two weeks earlier, but it would take six days of trading at average volume to cover that short interest so there is still a lot of money wagering that the stock will drop.
8. Level 3 (LVLT), the broadband infrastructure company, has also been at the top of short selling lists for years. It has a float of close to one billion shares which makes taking a short position in the stock fairly easy. Average trading volume per day is 10 million shares. As of April 15, there were 122.9 million shares sold short, down 13% in two weeks. Level 3 has two factors that short sellers love. It has awful financial prospects and a volatile share price. At the end of the last quarter, Level 3 had $6.3 billion in debt and almost no operating income. The company is constantly trying to restructure its balance sheet, is facing a number of shareholder class action suits, and its shares swing up and down rapidly. In early January, Level 3 traded at $1.49. It dropped to $.57 in mid-March and has nearly doubled since then.
9. Microsoft (MSFT), the most shorted large tech company traded on any U.S. exchange, is a nearly ideal way to bet against software. It has dominant global market share in PC, server, and enterprise products used by large companies and governments. Microsoft is no longer considered a growth stock by Wall St., but it remains one of the most impressive corporate cash flow machines in the world. Microsoft's ongoing battle with Google (GOOG) over search and desktop software keeps it in the headlines regularly, and its quest to get control of Yahoo!'s (YHOO) search engine operation has gone on for a year. Microsoft had a short interest of 88.4 million shares as of April 15 down 10%. The company has almost 9 billion shares outstanding and trades 68.7 billion shares a day. Microsoft (MSFT) traded at almost $21 in early January but fell to $14.87 in early March, a remarkable drop for a company with a market cap of $185 billion.
10. Intel (INTC) is the stock to short for the hardware industry just the way Microsoft is for investors betting against software. The shares in largest maker of chips in the world rises and falls on sales information about PCs and servers. Its expansion into less expensive and less powerful chips for netbooks and other portable devices may drive significant revenue growth once the economy begins to recover. Shares sold short in Intel as of April 15 were over 80 million, down 15%. Intel's positive remarks about sales in the PC market in its most recent earnings release may have driven some short sellers out of their positions. Intel shares are up 30% from a one-year bottom in late February. Intel trades heavily with an average volume of 72.7 million shares a day.
— Douglas A. McIntyre
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