Green Mountain Coffee Roasters
Long-time short sellers of Green Mountain have completely missed the boat on this explosive growth story. The single-serving coffee sensation has been a huge success. Before the stock collapsed in October, shares were up a whopping 214% over the past 12 months, making it easily one of the best performing stocks in the market.
The shorts have been undeterred. The most recent attack of the company gained steam in October. The shorts suggested accounting irregularities, spooking the market. GMCR lost nearly half its value in October, falling to a low of just more than $60 per share. The stock has recovered some in November, and more gains could occur with a strong earnings report after the bell Wednesday.
As of Oct. 14, 16% of GMCR shares were outstanding in the hands of short sellers. To the extent Green Mountain addresses the accounting question, the shorts likely will cover and cover quickly. Wall Street is looking for the company to make $1.65 for the fiscal year also ending Sept. 30. Profits are expected to grow by 59% in fiscal year 2012 to $2.62. At current prices, GMCR shares trade for 42 times current-year estimated earnings.
It is easy for short sellers to attack accounting issues for a fast-growing company like GMCR, but let the story develop before buying in. This could be one great short squeeze opportunity.
Technology firms have had a tough go of it in 2011. Since the early spring, shares of graphic chip maker Nvidia (NASDAQ:NVDA) have fallen by 44%. The selling goes beyond the fears of a financial crisis in Europe. The issue is about supply and demand. Short sellers see the global economy faltering, negatively impacting sales of computing devices and smartphones.
The selling comes in the face of strong operating performance. Nvidia has met or exceeded Wall Street estimates of profits in each of the past four quarters. The company reports results after the bell Thursday. Analysts are looking for a profit of 26 cents per share.
The operating performance has not deterred short sellers. As of Oct. 14, short interest was 7% of shares outstanding. Look for those shorts to start covering with another strong earnings report. For the full year ending Jan. 31, 2012, Nvidia is expected to make 99 cents per share, improving by 15% in the following year to $1.14. At current prices, shares trade for 15 times current-fiscal-year estimated earnings.
Tablet computing and handheld devices have plenty of growth in my opinion irrespective of global economic conditions. I expect the company to report a strong number on Thursday that will result in short sellers covering.
As of this writing, Jamie Dlugosch did not own a position in any of the aforementioned stocks.