Twice a month, when short interest data comes out, investors get to see which stocks Wall Street hates the most. A favorite strategy of hedge funders and money managers like David Einhorn and Jim Chanos, shorting allows advanced investors to bet on the demise, not the rise, of a stock.
Taking a look at the most shorted stocks each two weeks gives you some insight into professional short sellers and how they think.
The way it works is simple: You borrow shares of the stock you hate from your broker, who loans them to you from someone else’s account.
You pay a rate of interest for this loan, which is determined by supply and demand of said stock. Then you immediately sell those shares and pocket the cash. But you still owe those shares back to their rightful owners, so you eventually have to buy them back and return them.
The New York Stock Exchange is the physical face of Wall Street, and is by far the oldest American exchange, with origins in 1792.
These 10 stocks are the most hated stocks in the NYSE as of Sept. 15, the most recent date for which data is available.
They’re ranked by the number of shares short as a percentage of a stock’s float, which refers to the number of shares able to be traded on the public markets.
1. AAC Holdings (AAC)
Shorts as Percentage of Float: 63.5%
Shares of inpatient substance abuse treatment company AAC Holdings (AAC) could use some remedies of their own. The stock was chugging along just fine until early August, when the stock plunged after investors learned that its president was being indicted for murder. Since then, shares are off about 33%. With that, AAC earned its spot among the most hated stocks on Wall Street.
2. ITT Educational Services (ESI)
Shorts as Percentage of Float: 54%
While having a company bigwig indicted on a murder rap is reason enough to get bearish on a stock, you also can’t blame investors for looking skeptically upon for-profit education. ITT Educational Services (ESI) operates hundreds of locations, but with Feds taking a more strict stance on for-profit institutions, ESI faces tons of regulatory risk.
3. Wayfair (W)
Shorts as Percentage of Float: 53.9%
Shares of Wayfair (W) have performed marvelously this year, up 80% to-date. The online retailer specializes in home goods, and it’s had a number of impressive quarters this year that have driven the stock higher. However, noted short-seller Citron Research is “not a fan,” and the company isn’t profitable yet, making it one of the most hated stocks in the world. Next!
4. King Digital Entertainment (KING)
Shorts as Percentage of Float: 53%
Digital gaming is a tough business to be in, but that didn’t scare away King Digital (KING), which hit it big with its flagship game, Candy Crush Saga. Only problem? That success has proved hard to duplicate. Not exactly a shocker; nor is KING’s ignominious claim to being one of the most shorted stocks on Wall Street.
5. Carbo Ceramics (CRR)
Shorts as Percentage of Float: 47.2%
Surprised to see an oilfield services company on this list? Ya shouldn’t be. Oil prices, in case you’ve been living under a rock, have been in the dregs the entire year. Even though Carbo Ceramics (CRR) has seen its shares fall 48% already in 2015, shorts are betting there’s much more where that came from, with over 9.2 million shares sold short — nearly half its float.
6. Teladoc (TDOC)
Shorts as Percentage of Float: 46.5%
Teladoc (TDOC) provides on-demand health solutions by connecting patients and providers through its services via the Internet, mobile devices, video, and phone. Sounds like a cool idea, right? Unfortunately cool ideas don’t pay the bills, and it has yet to turn a profitable quarter. Last year, it lost more than $17 million on revenue of $43.5 million. Is there an app to stop the bleeding?
7. Lumber Liquidators (LL)
Shorts as Percentage of Float: 45.4%
My oh my! what a horrible year it’s been for Lumber Liquidators Holdings Inc (LL). Shares of the flooring retailer are down an incredible 78% this year. The nightmare began when 60 Minutes aired a piece alleging that its laminate flooring products sourced from China contained illegal amounts of toxic formaldehyde. Investigations followed, and the stock’s one of the most shorted stocks on the Street ever since.
8. Neustar (NSR)
Shorts as Percentage of Float: 44.5%
Shares of real-time information analytics company Neustar Inc (NSR) are not well-liked by some major institutional investors, that much is clear. The company’s been consistently profitable for years now, but analysts expect the company to reverse course and post lower revenues and earnings per share next year.
9. GameStop (GME)
Shorts as Percentage of Float: 44.1%
GameStop (GME) is facing some major long-term issues. Although its devoted customer base loves the in-store atmosphere and knowledgeable gamers behind the cash register, the unceasing trend toward digital gaming could eventually spell the end of physical game discs, spelling lower traffic and revenue for GME. Hard to see GameStop navigating its way around that issue.
10. Box (BOX)
Shorts as Percentage of Float: 11.6%
Shares of cloud storage company Box Inc (BOX) have fared horribly this year. After its initial public offering in January, BOX stock has fallen more than 44%. Apparently the buzz of cloud computing isn’t enough to get investors to look past the hundreds of millions of dollars the company hemorrhages each year. Hard as companies may try, Wall Street’s still not convinced that red is the new black.
As of this writing, John Divine was long shares of W stock. You can follow him on Twitter at @divinebizkid or email him at editor@investorplace.com.
