Bears Vs Bulls: High Short Interest Stocks

Stocks mentioned - (PCLN), (GDP), (SPWR), (OSTK), (TTWO).

There is a war being waged on Wall Street right now – stocks that have a positive 52 week gain and Short Interest of 30–60%.  A high short-interest stock should be approached for buying with extreme caution but not necessarily avoided at all cost. Short sellers (like all investors) aren't perfect and have been known to be wrong from time to time.

In fact, many contrarian investors feel that a high short-interest ratio is bullish - because eventually there will be significant upward pressure on the stock's price as short sellers cover their short positions (i.e. buy back the stocks they borrowed to return to the lender).

Here are 5 stocks that have continually squeezed shorts over the past 52 weeks. Who will win? Can they keep going up forever? You be the judge. Here’s my two cents:

Let's get into it.

Priceline.com (PCLN)

Priceline is the heaviest hitter of the list for obvious reasons. A 52 week return of 95.65%, and Short Interest pegged at a staggering 58.38%.

The Bears have been getting crushed on this one. In spite of that, since hitting a 52 week high of $144.34, shares have started to fall. Can the stock make a comeback?

I’m going to vote for the Bears on this one. Priceline is completely inflated and what goes up must come down. Despite Shatner being a complete badass he has nothing to do with the bottomline, but it would seem the analysts can get enough of him.

Just yesterday Piper Jaffray added Priceline Inc to its list of Internet top picks, in part due to expectations of strong growth in Europe.

Piper Jaffray said European operations, which account for about 70 percent of the company's operating profit, benefited from a sequential rise in May European discount airline traffic that could offset the slowdown in the United States.

"International travel (especially Europe to U.S.) is becoming a larger part of Priceline's business, and should help Priceline continue to outpace industry growth," said analyst Aaron Kessler, who maintained a "buy" rating and a price target of $175 on the stock.

Kessler also expects the European hotel market to be much more resilient than that of the U.S. market, given higher priority Europeans put on leisure travel and the lower costs of getting to destinations in Europe.

Think we're wrong, then buy some Puts and Calls on PCLN and really take note.  One miss by them and Shatner is having his ass handed to him.

Goodrich Petroleum Corporation (GDP)

Goodrich is flying high on record oil prices. But if you read the Stockmasters, you know that we are bearish on Oil, and think that we’re near the peak of oil prices.

Oil speculation, oil this, oil that, just stay away. Its a House of Cards just waiting to tumble.

Wall Street, on the defensive against accusations that speculators are driving oil prices to record highs, is on a campaign to explain to the U.S. Congress that it is not the villain.

At a joint hearing this week by the Senate Financial Services Appropriations Subcommittee and the Senate Agricultural Committee, Senators explored the dispute over whether tougher regulation of commodity markets is called for.  They questioned a wide range of experts on what is needed to rein in steadily rising oil and other commodity prices and on whether speculation is contributing measurably to the increases.

The underlying debate centered on recently proposed legislation to beef up the Commodity Futures Trading Commission (CFTC) and expand the agency’s power to demand more information and transparency from market players in this country and abroad.

This is another case of speculation. It’s a hard one to call Bull or Bear on, but if you stuck a gun to my head I would have to go with the Bears.

SunPower Corporation (SPWR)

The Masters are all about Green-Tech companies. You can bet that with higher oil and natural gas prices, Solar Power is in the spotlight.

 Even if oil prices go back to $50 a barrel, the current energy crisis will not be forgotten easily, by governments or their citizens. Solar power is here to stay. I’m going to go Bull on Sunpower.

Just yesterday, American Technology Research reiterated its Buy rating and $164 price target on SunPower Corp. (Nasdaq: SPWR).

The firm believes SunPower has positioned itself appropriately to "weather any geographic demand shift on the horizon" through its pre-emptive move into the Italian energy market. AmTech calls Italy "the heir apparent to the growth of the Spanish solar market" given its expensive rates of electricity ($0.21), its large share of electricity generation compared to the rest of Europe (8%) and its low dependence on alternative and, specifically, solar power sources (5.2% of its electricity from renewable sources and under 1% from solar).

AmTech notes that SunPower will only need to install about 22MW in Italy during Q4 to meet the firm's FY08 estimates, which it calls "quite achievable."

SunPower Corporation engages in the design, manufacture, and marketing of solar electric power technologies.

Overstock.com (OSTK)

Watching this stock go from $39 to $10 last winter was beyond insane as was CEO Patrick Byrne's trip to the DeathStar accusing everyone of driving his stock down.  Wall Street Naked Short Selling Overstock.com has become a household name, after the billions spent on advertising and the lasting impression of the 'O' lady, the gamble paid off. 

Everyone in America uses Overstock.com and its discount blow-out deals appeal to a strapped U.S. consumer. 

However, a company is only as good as its managment, and Patrick is a strange one, Mr. Grinch.

CEO Patrick Byrne has held calls with financial analysts in which he delved into his sexuality and experiences with cocaine, in the midst of a tirade on how a cabal led by a "Sith Lord" was out to destroy his company.

You can't deny the glory of OSTK's return from early this year but can it continue?  It's just to risky to play.

TTWO Take-Two Interactive Software, Inc. (TTWO)

A picture is a thousand words.  If you still are holding this stock, the game is up and the money has been made, there's no use hanging on.  Niko returned this company to greatness, now the run is done.