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Strategies & Market Trends : Gorilla and King Portfolio Candidates
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To: Manx who wrote (54770)6/17/2005 4:33:23 AM
From: Elroy  Read Replies (1) of 54805
 
Hi, I'm a newcomer here and someone else suggested this place to ask a general question. I own shares of OVTI, a profitable semiconductor company that makes image sensors. These sensors are used in digital cameras and surveilance, but primarily in camera cell phones. OVTI is profitable and has a pristine balance sheet. My question is on its current short position.

There are ~18 million shares short, and the shares outstanding are ~57 million. That means 38% of the float is short.

I compared with other semiconductor stocks, and in a basket of 15 semis the short position as % of the float ranged from 0% to 6%. There was one outlier, ISSI, which had 15% of its float short. ISSI reported operating losses of $6 million on $35 million in sales last quarter, so presumably there is some fundamental reason for ISSI's 15% short.

So the question - what would cause OVTI stock to get such a huge short position? Its fundamental story seems OK, and is least as good or bad as the other semi stocks which have 3% of their float short. It's definitely not going bankrupt. It's valuation is at $16 is less that the average semi (PE =12x vs. ~22x for most semis). How does an OK fundamental story and low valuation add up to 38% of the float being short? Does anybody have any idea?

Any insights would be appreciated.
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