Yesterday, I wrote an article on seven potential short stocks in Healthcare. Today, we will discover seven potential short stocks in financial services sector.
The advent of High Frequency Trading (HFT) makes me believe that financial services sector stocks rank high in the list of stocks shorted regularly and that too in high volumes. Just look at the most traded stocks. On any day, you find financial services stocks figuring in the list. Moreover, on some days the combined share trading volumes in Citigroup (C), Bank of American (BAC), and CIT Group (CIT) accounts for nearly 10% of all US equities! That's amazing! We have three stocks out of over 5000 names with a constant bid/ask present in the three to five cents range! Which means the institutional players must be shorting while betting on these stocks price movements. Another confirmation – the SEC banned short selling in 799 financial stocks last fall. Of course, later the ban was lifted - which means that the retail investors do have the option to use shorting to lock in short-term profits. Let's see which stocks in the financial services sector could deliver us profits by shorting.
Our stock universe
Our stock universe (after eliminating penny stocks) of financial services stocks starts at 492 stocks. We will not consider stocks whose average trading volume is less than 100,000 (because if the volume is lower than 1,000,000 then I believe institutional players can easily change the game with a single or few trades).
Manageable list
P/E values of our stock universe range from a low of 0 to 15494. There were only 73 stocks that met penny stock criteria and average volume criteria. Further we can eliminate stocks whose P/E values are less than 20 (the reason being these stocks are assumed to be giving normal returns which means they don't present us opportunities to make profit by shorting). Now we are left with only 33 stocks.
Out of these 33 stocks, we pick 10 stocks that have shown increase in short interest (because these stocks are likely to experience higher price declines).
|
Company name
|
Symbol
|
Mcap
($ billion)
|
P/E ratio
|
52w low
|
Short Interest - Prior
|
Short interest
|
Short interest
Inc/Dec
|
Days To Cover
|
|
Invesco Ltd.
|
IVZ
|
9.02B
|
37.43
|
8.35
|
8,762,800
|
10,482,600
|
1,719,800
|
2.1
|
|
Fidelity National Financial, Inc.
|
FNF
|
3.21B
|
22.83
|
6.66
|
5,072,300
|
6,258,600
|
1,186,300
|
1.6
|
|
ICICI Bank Limited (ADR)
|
IBN
|
20.81B
|
27.1
|
9.6
|
3,785,400
|
4,573,100
|
787,700
|
2
|
|
Principal Financial Group, Inc.
|
PFG
|
8.63B
|
21.39
|
5.41
|
9,936,300
|
10,630,700
|
694,400
|
3
|
|
Associated Banc-Corp
|
ASBC
|
1.52B
|
46.14
|
8.92
|
8,943,000
|
9,617,100
|
674,100
|
7.1
|
|
People's United Financial, Inc.
|
PBCT
|
5.68B
|
49.77
|
14.72
|
11,901,900
|
12,228,600
|
326,700
|
3.2
|
|
SEI Investments Company
|
SEIC
|
3.44B
|
25
|
9.19
|
1,150,800
|
1,392,800
|
242,000
|
1.4
|
|
MasterCard Incorporated
|
MA
|
28.62B
|
37.98
|
113.05
|
9,643,000
|
9,824,800
|
181,800
|
5.1
|
|
Ameriprise Financial, Inc.
|
AMP
|
9.34B
|
120.8
|
11.74
|
4,883,600
|
5,062,800
|
179,200
|
1.3
|
|
First Niagara Financial Group Inc.
|
FNFG
|
1.95B
|
20.66
|
9.48
|
5,246,700
|
5,300,600
|
53,900
|
1.5
|
*Short Interest Ratio
Final seven
We will pick the final seven based on target price and over valuation. Since the three companies namely SEI Investments Company, Ameriprise Financial, Inc, and MasterCard Incorporated are likely to experience stock price increases, these are not part of the seven potential short stocks in Finance sector.
|
Company name
|
Symbol
|
Last price
|
Target price
|
Appreciation/depreciation
|
Intrinsic value
|
Over valuation
|
|
ICICI Bank Limited (ADR)
|
IBN
|
37.38
|
45
|
20.4
|
11
|
-26.4
|
|
Principal Financial Group, Inc.
|
PFG
|
27.06
|
31
|
14.6
|
1.2
|
-25.9
|
|
Invesco Ltd.
|
IVZ
|
21.69
|
33
|
52.1
|
2.3
|
-19.4
|
|
First Niagara Financial Group Inc.
|
FNFG
|
13.01
|
15
|
15.3
|
0.5
|
-12.5
|
|
Fidelity National Financial, Inc.
|
FNF
|
13.94
|
17
|
22.0
|
3.5
|
-10.4
|
|
Associated Banc-Corp
|
ASBC
|
11.91
|
12
|
0.8
|
3.44
|
-8.5
|
|
People's United Financial, Inc.
|
PBCT
|
16.45
|
18
|
9.4
|
16.76
|
0.3
|
|
SEI Investments Company
|
SEIC
|
17.99
|
22
|
22.3
|
21.54
|
3.6
|
|
Ameriprise Financial, Inc.
|
AMP
|
36.63
|
40
|
9.2
|
75.5
|
38.9
|
|
MasterCard Incorporated
|
MA
|
220.75
|
242
|
9.6
|
266.5
|
45.8
|
