Technology > Tech Investor
Bearish bets
Short interest is up for the first time in 3 months. Here are some techs shorts are targeting.
February 27, 2003: 2:53 PM EST
By Paul R. La Monica, CNN/Money Senior Writer

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NEW YORK (CNN/Money) - The bears are back.

That's right. Short sellers, investors who profit when stocks go down, have been getting a little more surly lately, with short interest rising in the thirty days ending Feb. 14 -- the first such increase in three months.

That short-interest data from both the Nasdaq and the New York Stock Exchange, released during the past week, show that there are several technology companies that the shorts are targeting.

Media, software and chips

On the NYSE, short interest in Liberty Media (L: Research, Estimates), the programming conglomerate controlled by John Malone, surged nearly 90 percent. The company has been involved in recent speculation that it may launch a bid for Hughes Electronics (GMH: Research, Estimates), which owns DirecTV.

Shorts are aggressively targeting mainframe software developer BMC Software (BMC: Research, Estimates) as well. Short interest was up 72 percent since mid-January. The stock has been on fire as of late, up 76 percent since early October. Dramatic moves such as this often attract short sellers who bet that the stock could take a breather.

Looking over at the Nasdaq, which the majority of technology stocks call home, there are several large tech companies coming under attack.

The shorts are circling
Five tech stocks with rising short interest in the past month.
CompanyJan. Short Interest (# of shares)Feb. Short Interest (# of shares)% change
BMC Software4.9 million8.5 million71.9%
Cree15.9 million21.9 million38.0%
Lam Research7 million10.7 million52.4%
Liberty Media10.7 million20 million87.6%
Oracle45.3 million59.7 million31.7%
Sources:New York Stock Exchange, Nasdaq

Short interest in Oracle (ORCL: Research, Estimates), the database software giant, was up more than 30 percent from mid-January. The company is scheduled to report its latest quarterly earnings in mid-March and investors may be betting that the results won't be that good.

Oracle CFO Jeff Henley said earlier this week that the company's revenue growth should be slightly positive from the prior quarter. The market didn't like that news since the company previously said that sequential sales growth might be as high as 4 percent.

Semiconductor-related stocks are also under siege. The chip sector is still well above its early October lows although hopes are fading about an imminent recovery in IT spending. Short interest in chip equipment company Lam Research (LRCX: Research, Estimates) popped 52 percent from a month ago and short interest in competitors Applied Materials (AMAT: Research, Estimates), Novellus Systems (NVLS: Research, Estimates) and KLA-Tencor (KLAC: Research, Estimates) increased slightly as well.

Shorts have also heavily increased their bearish bets on chip materials maker Cree (CREE: Research, Estimates), as well as on semiconductor manufacturers Linear Technology (LLTC: Research, Estimates) and Microchip Technology (MCHP: Research, Estimates).

One part of an investing strategy

Now before readers start peppering me with nasty e-mail about how the only reason I must be writing about the aforementioned stocks is because I am actually shorting them, let it be known that I own only one stock: that of my employer, AOL Time Warner (AOL: Research, Estimates), and that's in my 401(k).

Further, I am not saying that any of these stocks are destined to go down or should go down. Short interest is just one of several metrics that investors should keep an eye on.

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The exchanges report short interest changes once a month (typically during the last week) and I think that the Nasdaq's Web site is the best place to find this information, even for NYSE and AMEX-listed stocks. Just type in a ticker symbol and once you get to the quote page, short interest is one of the options you get in a drag down menu.

Of course, short sellers can be wrong. Or just have a bad sense of timing. Look at what happened to Hewlett-Packard (HPQ: Research, Estimates) this week for example. Short interest had been up 20 percent between mid-December and mid-January. But short interest decreased around 7 percent in the most recent period.

But the stock plummeted 15.5 percent on Wednesday after the company missed revenue estimates and gave uninspiring guidance for the current quarter. So the shorts that covered their bets might have been right about HP. They were just too early.  Top of page

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