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Short Interest Update: Dunkin Brands Group Inc (DNKN)

Could additional gains be in store for DNKN?

by 11/14/2013 9:55:26 AM
Stocks quoted in this article:

A number of stocks saw significant spikes in short interest over the most recent reporting period, including Chinese Internet concern Qihoo 360 Technology Co Ltd (NYSE:QIHU), online travel issue TripAdvisor Inc (NASDAQ:TRIP), and doughnut purveyor Dunkin Brands Group Inc (NASDAQ:DNKN). Here's a closer look at these three outperformers, all of which could benefit from increased skepticism.

Qihoo 360 Technology Co Ltd (NYSE:QIHU) has had a banner 2013, as the shares have tripled in value year-to-date to trade at $89.38. What's more, the security tagged a record peak of $96.74 just last month. Nevertheless, short interest surged by 44.8% during the latest reporting period, and now accounts for a healthy 5.5% of the stock's available float. With 3.7 million shares presently sold short, the equity could end up benefiting from a wave of short-covering activity down the road.

TripAdvisor Inc (NASDAQ:TRIP) has surged more than 145% on a year-over-year basis to perch at $87.49, while also outpacing the broader S&P 500 Index (SPX) by roughly 14 percentage points during the past three months. However, the stock saw a 25.7% jump in short interest during the last half of October. These bearish bets now make up 19.7% of the equity's available float. Should the security continue to trek higher, an exodus by the skeptics could add more fuel to TRIP's fire.

Last but not least, Dunkin Brands Group Inc (NASDAQ:DNKN) boasts a gain of 44% so far this year, and a 52-week advance of nearly 65% to wink at the $47.80 level. The stock also reached an all-time high of $49.40 on Oct. 25. Even so, short interest swelled by 29.1% over the most recent reporting period, and by 34.1% during the last two reporting periods. These pessimistic positions -- which currently represent 6.7% of DNKN's float -- could trigger a short-squeeze situation for the security.

This pessimism toward the coffee and pastry maven is evident in other areas, as well. Data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) shows a 10-day put/call volume ratio of 2.03 for DNKN, confirming puts bought to open have doubled calls during the past two weeks. This ratio is just 4 percentage points shy of a 12-month peak, signaling traders have been picking up puts over calls at a near-annual-high pace. An unwinding of these bearish bets could serve as a contrarian tailwind for the security.

Also of note, only eight of the analysts covering DNKN have handed out "strong buy" endorsements, compared to seven "holds," and one "strong sell" suggestion. Meanwhile, the stock's average 12-month price target of $50.22 denotes expected upside of just 5.1% from current levels. This leaves the door open for a round of upgrades and/or price-target hikes, which could help add to the security's upward momentum.

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