Some of the world’s top investors are short sellers. After all, they want to find any way to make money. And yes, sometimes the best approach is to find stocks that are vulnerable.
Yet over the past couple weeks, it’s been tough for short sellers to make a buck. Basically, the volatility has been extreme. But that hasn’t stopped these investors from trying. So, what are some of their favorite targets? Here’s a look:
Motorola Mobility (NYSE: MMI): In 2011, the share price of the company has gone from $29.10 to $21.64. Yes, it’s been a nice ride for short sellers. Although, they seem to think that there is still more downside potential. The short interest is about 7.30% of the float.
Motorola Mobility, which is a spin-off from Motorola Solutions (NYSE: MSI), is a seller of smartphones and tablets. While the company is benefiting from strong growth rates in its markets, there are still some major concerns.
One of the problems is the intense competition. Of course, Apple (NASDAQ: AAPL) continues to gain marketshare. The result has been horrific for companies like Research-in-Motion (Nasdaq: RIMM) and Nokia (NASDAQ: NOK).
Next, Motorola Mobility relies heavily on Google’s (NASDAQ: GOOG) Android. While this has been a good way to get market traction, the fact remains that there are other companies using the same strategy, like Samsung, HTC, and Sony Ericsson. So it is difficult to achieve differentiation.
Tesla Motors (NASDAQ: TSLA): The seller of electronic cars has attracted a large number of short sellers. Actually, over the past month, the short interest increased from 14.94 million to 15.90 million. This represents about 38.60% of the float.
Tesla is definitely an exciting company – and this has been important in keeping the stock price robust. However, the company still loses large amounts and this will not change anytime soon.
Basically, Tesla will need to demonstrate that it can develop a car for masses. The problem is that other rivals – such as GM (NYSE: GM) and Nissan – are doing the same thing. Of course, they have the advantage of huge distribution, scalable operations and mega brands.
To deal with this, Tesla has actually stopped production of its high-end Roadster, which should help provide more focus. Oh, and the company recently raised $234 million in a secondary offering.
However, if Tesla gets tepid response to its Model S, it could mean a nice gain for short sellers.
Spreadtrum Communications (NASDAQ: SPRD): This Chinese-based chip operator has seen a big surge in short interest. Over the past month, the position has gone from 2.82 million to 5.08 million shares.
Then again, a report from Muddy Waters LLC has cast doubt on Spreadtrum’s inventory policies as well as management departures. Keep in mind that the firm has become influential in targeting Chinese companies, especially those that have been high-fliers.
True, such accounting matters can get tricky and tough to decipher. But so far, investors are quite skittish on Chinese tech companies. Thus, there could be a tough battle for Spreadtrum.
Tom Taulli’s latest book is “All About Short Selling” and he has an upcoming book called “All About Commodities.” You can find him at Twitter account @ttaulli. He does not own a position in any of the stocks named here.
