Diana, I don't really think most SOES traders look at fundamentals such as short interest. They are more interested in volatile, high volume stocks. It is awfully tough to day trade higher-spread, medium volume stocks such as Cymer. That said, the SOESers will pounce on CYMI like a starving lion on a dead carcass if CYMI has any kind of explosive move.
Regarding your other question about how to cover a large short position, the only way to do it with a medium-volume stock like Cymer is very slowly. Buying as little as 10,000 shares of Cymer can move it more than a level (1/8, 1/4, or even sometimes 3/8) easily. For the life of me, I can't understand why the short-interest figure didn't decrease last month. I have that nagging fear that someone knows something that I don't, but rationality tells me otherwise.
I don't know how much of the short position is market makers. They can cover without anyone knowing just by buying what someone is selling. It definitely seemed like Montgomery and Morgan Stanley were shorting it back when this stock first caught my attention at the end of October. They were always on the ask (they could have just been selling their inventory). But for more than the last month both have been much less active. Morgan still seems to be selling, but on a low or medium volume stock it is especially hard to tell. This because they can buy from people on one of the other ECN's (ARCA, Instinet, Island, etc.) and never show themselves on the top bid. Although I try not to put a whole lot of stock (no pun intended) in analyst ratings, I felt especially good when I saw a CYMI poster indicate that Montgomery reaffirmed their earnings and growth estimates the other day (I went back and couldn't find the post-did I dream it?). Someone else a week or so ago indicated Morgan also felt that the 50% growth was there after their perceived inventory correction worked itself out. They wouldn't be saying these positive things if they were short.
For any other shorters, they must be idiots. CYMI for the last month probably hasn't averaged 700,000 shares a day and has a relatively thin float. When there is good news, the price is going to spike anyway. Given a $15 share price and the fact that they have $6 a share in cash, the real price is only $9. This for a stock that is absolutely certain to earn $1 this year, is growing at 50% a year, and is technology's future bottleneck. There is a light at the end of the tunnel for the shorts. The only problem is that it is a 250 mph bullet train.
Jay |
