McAfee - Short selling

Five Short-Squeeze Plays 08.02.05, 8:30 AM ET
Could these five stocks be bear traps? When traders think a stock will fall, they can make money selling it short. This involves borrowing shares and selling them in the hope of buying them back at a lower price. But evidence of short-selling doesn't always mean a stock is doomed. If the stock rises, short-sellers are often forced to cover their positions by buying back the borrowed shares they've sold. Such a "short squeeze" sometimes pushes the stock even higher. To find a few short-squeeze candidates, we looked for a 30% or greater rise in short interest (the amount of shares sold short but not yet repurchased) in the past month, as well as short interest greater than 2% of float. We also limited ourselves to stocks trading within 15% of their 52-week highs and that have gained more than the S&P 500 over the past year. We took only companies with estimated three- to five-year (annualized) earnings growth of 10% or better.
Squeeze The Shorts
Company
Price
Industry
One-Month Change In Short-Interest*
EPS** Projected Growth***
MarketValue ($mil)
Avnet (nyse: AVT - news - people )
$26.05
Electronic Instr & Controls
42%
15%
$3,159
Corporate Executive Board (nasdaq: EXBD - news - people )
80.94
Business Services
31
28
3,231
Domino's Pizza (nyse: DPZ - news - people )
25.10
Restaurants
53
11
1,620
Franklin Resources (nyse: BEN - news - people )
80.72
Investment Services
51
14
20,317
McAfee (nyse: MFE - news - people )
30.14
Software & Programming
75
15
5,108Prices as of Aug. 1. *Month-over-month change in the total number of shares that have been sold short and not yet repurchased. **EPS: Earnings per share. ***Annualized, projected next three to five years. Sources: FT Interactive Data, Reuters Fundamentals and Thomson First Call via FactSet Research Systems