Short sellers seem to have intuitively known as early as October 15 that Hurricane Sandy was going to be a real bruiser of a storm for the Eastern Seaboard. While that is not really true, Generac Holdings Inc. (NYSE: GNRC) is surging on the potential new business from before, during, and after Hurricane Sandy landed on Monday evening.
The gain is an obvious one in that the company makes portable power generators. It is still interesting that such a large pop has been seen when you consider that the shares had been ralling for four staright days ahead of the storm. What happens when power is out? Generators get turned on. This is a game where generally it requires a decent amount of disposable income because generators are not cheap and those generators can quite literally sit idle for years before they are ever needed. Generac has two small portable generators which retail under $500 but they also have models which sell for $1,000 and $2,000 per unit.
If you look back in the short interest of the October 15 settlement date, the NASDAQ showed that only 837,356 shares were actually short. This was down almost 14% from just over 1 million shares short at the end of August and it was the lowest short interest reading of 2012. Another low was seen for 2012 with its days to cover ratio at only 1.73 versus more than 4 for each of the three prior reports on the short interest. Those short sellers would have been crushed if they would have stuck with that bet. What is interesting is that the short sellers may be trying to bet against Generac now with a 20% pop.
Generac traded up 20% with about 2 hours until the close on Wednesday at $34.01 against a prior 52-week range of $18.35 to $30.61. We have also seen 4.25 million shares trade hands versus an average of 323,000 normally. Its market cap is $2.3 billion and Thomson Reuters is calling for just over $1 billion in 2012 sales.
JON C. OGG