Shorts Target JC Penny, LinkedIn, Weatherford

Short interest grows on NYSE and NASDAQ

For the first half of June, short sellers got aggressive on the New York Stock Exchange and NASDAQ. Then again, the equities markets were quite volatile and there were also some high-profile implosions, like Research In Motion (NYSE: RIMM).

The increase in short interest for the NYSE was 2.5%, rising to 13.49 billion shares. As for Nasdaq, the short interest edged up 0.9% to 7.31 billion shares.

So what were some of the favorite targets of short sellers?

Here’s a look:

J.C. Penney (NYSE: JCP): Over the past month, the short interest increased from 19.64 million shares to 23.01 million shares. The count now represents 15.30% of the float.

Recently, J. C. Penny recruited Ron Johnson as its new CEO. He was the mastermind behind the wildly successful Apple (NASDAQ: AAPL) stores. Before this, he was key for the brand strategy at Target (NYSE: TGT).

As a result, the stock of J. C. Penny shot-up about 17% on the news. However, short sellers have some doubts. It’s likely going to take several years to make progress. Besides, J. C. Penny has a tired brand and continues to have sluggish growth.

LinkedIn (NYSE: LNKD): The company is the top social network for professionals. Of course, it launched a successful IPO on May 19and the stock price doubled.

But short sellers have wasted little time in taking positions. The short interest already represents about 29% of the float.

No doubt, LinkedIn is growing quickly and has multiple revenue streams. Yet the valuation is at nosebleed levels. At a market cap of $8 billion, the shares are trading at about 24 times revenues. But over time, more stock will come onto the market, which should put pressure on the valuation.

But shorting LinkedIn can be risky. On Tuesday, the shares spiked 12% because of a round of “buy” recommendations from its underwriters.

Weatherford International (NYSE: WFT): During the past month, the short interest has gone from 20.33 million shares to 26.74 million shares. About 3.6% of the float is short.

Weatherford is a top oil services company. Still, it does not have the massive scale of some of its rivals, like Schlumberger (NYSE: SLB), and this could be a problem as oil projects get larger and more complicated. However, the biggest drag could be the sudden drop in crude prices. This is likely to result in delays of projects.

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.

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