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PPG Industries (PPG), Ford Motor (F) Among Stocks With Biggest Short Interest Changes

Others include VIV, KKR, but no immediate short-squeeze candidates

by 2/14/2013 9:07:33 AM
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Schaeffer's bi-weekly review of companies seeing major changes in short interest (the percentage of a company's stock that has been sold short -- or a bet that the stock will move lower) covers several sectors, including international telecoms, industrial manufacturing, investment funds, auto parts and auto makers, and mining. But an analysis of the list doesn't turn up an immediate candidate for a short-squeeze rally -- spurred when short traders rush to sell off their positions if the stock rises, thereby driving the price even higher. Here is a quick look at the companies with the largest gains and drops in short interest over the last two weeks, followed by a full list of the top 25 short interest decreases and increases:

Short Interest Gains

  • Telefonica Brasil SA (ADR) (NYSE:VIV - 25.61) had the biggest gain in short interest over the past two weeks, seeing a jump of 253%. Short interest only accounts for 2% of the company's total float, but it would still take short sellers about four days to unwind their positions. Option traders have been fairly pessimistic on the stock. The stock's Schaeffer's put/call open interest ratio (SOIR) stands at 1.27 for options that expire in the next three months, a ranking that is higher than all but 6% of other readings taken in the last 12 months. In other words, traders have rarely been as put-oriented in the last year. Technically, the stock has been stuck in neutral since overcoming a bit of a drop in early December, when VIV approached an annual low. The equity is down roughly 9% as compared to this time last year, although it has gained about 6.4% so far this year.

  • Of those on the list, PPG Industries, Inc. (NYSE:PPG - 139.11) had the largest percentage of its float devoted to short interest, at 23.5%. The industrial coatings company also saw short interest as a whole more than double in the last two months, and it has increased six-fold over the last month. At that rate, it would take more than five trading days for those with shorted stock to unwind their positions. But at closer inspection, this stock may not be in line for a short-squeeze. PPG is the midst of a spin-off of its Eagle Spinco division, which is merging with chemical concern Axiall (NYSE:AXLL - 57.57) (formerly known as Georgia Gulf). Some investors are using the short strategy as a way to hedge this deal, which tempers the indicator's contrarian effect. Option trading sentiment on PPG, meanwhile, has been slightly pessimistic. The 10-day put/call volume ratio for the equity stands at 0.87, according to data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). That is higher than 64% of similar readings taken in the last year, meaning traders are buying to open new bearish put positions a bit more often recently than in the past. Overall, PPG has been on a steady climb over the last year, gaining 53% year over year.

Short Interest Drops

  • Corporate financier KKR Financial Holdings LLC (NYSE:KFN - 11.50) was atop the list of companies with the largest decline in short interest over the last two weeks. KFN saw short interest fall by 79%, and short interest now accounts for just 1.7% of the company's total float. KFN shares are up 8.9% on the year, and 23.3% year over year. As for option traders, the equity's 10-day call/put volume ratio is 11.37, according to data from the ISE, CBOE, and PHLX, meaning traders have been buying to open 11 times as many calls as puts during the past two weeks. And that ratio ranks in the 67th percentile of similar readings taken in the last 12 months -- in other words, traders are more call-heavy recently.

  • Another major firm to see its short interest drop significantly is Ford Motor Company (NYSE:F - 13.04). The automaker's short interest fell 49%, and short interest now accounts for just 1.3% of the company's total float. The drop in bearish sentiment is also reflected in the option pits. F's 20-day call/put volume ratio on the ISE/CBOE/PHLX is 2.27 and the 50-day call/put volume ratio is 3.32, meaning traders are preferring longer-term calls twice to three times as much as puts. Technically, the stock is taking a breather from its recent run -- it hit its 12-month peak of $14.30 on Jan. 17 but has dropped nearly 9% since then.
List of the largest short interest increases
 List of the largest short interest decreases

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