Investing

Hedge Fund Short Sellers Are All Over 5 Very Well-Known Stocks

IBM

Short sellers are probably closely studying this blue-chip giant after it posted the best quarters for earnings in years. International Business Machines Corp. (NYSE: IBM) is a leading provider of enterprise solutions, offering a broad portfolio of information technology (IT) hardware, business and IT services, and a full suite of software solutions. The company integrates its hardware products with its software and services offerings in order to provide high-value solutions.

IBM’s five major segments are: 1) Cognitive Solutions, 2) Global Business Services, 3) Technology Services & Cloud Platforms, 4) Systems and 5) Global Financing. Analysts cite the company’s potential in the public cloud as a reason for their positive outlook going forward. But note that IBM is among the big corporations with the most debt.

The company’s adjusted second-quarter earnings fell 31% but beat analysts’ expectations. The company’s revenue declined year over year for the second quarter in a row, with coronavirus playing a role across multiple business lines. Overall, it was a solid report, and some of the short sellers may think about closing positions.

Holders of IBM stock receive a 5.3%% dividend. The consensus target is $138.56, and the shares were last seen at $122.94.

Tesla

This has been one of the most talked-about companies over the past two years and a short seller’s nightmare. Tesla Inc. (NASDAQ: TSLA) manufactures and sells electric vehicles, particularly its high-end Model S and X, as well as the mass-market-oriented Model 3. It makes some of America’s most eco-friendly cars.

Tesla also generates revenue from selling zero-emission vehicle credits to original equipment manufacturers, installing, operating and selling solar energy systems (previously SolarCity), and manufacturing and selling energy storage systems to customers.

The stock has been on a huge short-squeeze-driven run, and CEO Elon Musk is unpredictable as well. The numbers keep rolling in and the stock keeps going higher. Tesla reported its first full year of GAAP profits last week, along with second-quarter results. During the period ending June 30, 2020, the electric car company grappled with the effects of the COVID-19 pandemic on its U.S. employees and factory operations, especially. Tesla said its revenue reached $6.04 billion during the quarter, with $428 million of that from regulatory credits.

Shorting Tesla stock is kind of like shorting bitcoin. The potential for a victory is huge, but so is the risk potential. The $1,202.67 consensus price is well below the most recent close at $1430.76.

Trade Desk

This stock had a red-hot initial public offering (IPO) in 2016 and has been steadily moving higher ever since. Any aggressive sell-off would offer aggressive short sellers a way to cover some shares. Trade Desk Inc. (NASDAQ: TTD) provides a self-service omnichannel software platform that enables clients to purchase and manage data-driven digital advertising campaigns in the United States and internationally.

The company’s platform allows clients to manage integrated advertising campaigns in various advertising channels and formats, including connected TV, mobile, video, audio, display, social and native on various devices, such as smart TVs, computers and mobile phones and tablets.

The stock has been on a huge roll and trades at a massive 176 price-to-earnings (P/E) ratio. However, with earnings expected this week, the shorts may press their trades in hopes of a miss or bad forward guidance. Given the massive increase in digital advertising, this could prove interesting.

The consensus price objective of $336.76 is well below the Friday closing price of $451.33 a share.


Short selling is an extremely difficult game, and while it would have been incredible to have been short a sizable position prior to the February to March 35% meltdown in less than 30 days, the 44% rally off the lows has taken away those gains and perhaps more, if hedge funds pressed their bets at the lows.