Short interest ratio - how much does it matter to you? investment, potential, interest, investor

Mechanic

Hey guys,

When you're looking at a potential investment or trading opportunity, how much do you look into short interest ratio and related metrics? How do you think about these things in the process of making an investment decision, assuming you are a fundamental investor? How does your benchmark for what you consider to be a high short interest ratio vary based on sector and capitalization?

rohitdoshi

numi Wrote:
-------------------------------------------------------
> Hey guys,
>
> When you're looking at a potential investment or
> trading opportunity, how much do you look into
> short interest ratio and related metrics? How do
> you think about these things in the process of
> making an investment decision, assuming you are a
> fundamental investor? How does your benchmark for
> what you consider to be a high short interest
> ratio vary based on sector and capitalization?


Numi-

My PM is pretty concerned with it, especially in the early stages. If 10%+ of the shares outstanding are short, and we can't very firmly articulate why the shorts are wrong, then we either keep researching or admit that we're just plain not sure of our findings enough to make a buy call on this particular company. As I think I told you elsewhere, we're micro- and small cap (50mm to 1B) and this 10%+ ratio seems to be about the threshold, industry and capitalization don't seem to matter much. Then again, this could be sampling error - as a rule, we tend to look at very conservatively capitalized companies, as we're a value shop.

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kickthatcfa

These numbers are totally bogus. I knew a PM who had a larger short position in a name in his fund than the total short figure that was published by the exchange.

Sunshine4ever

Bloomberg pulls the numbers from the exchanges.

luda002

Not an uncommon scenario particularly since the SI values are only updated twice a month so if the manager opens/closes a significant short position it is not immediately reflected in the value.

ryanlb

very important and absolutely worth a look...ignoring it is like not checking under the hood of a car before you buy it



Edited 1 time(s). Last edit at Monday, July 11, 2011 at 03:23PM by builders.

cv4cfa

If I have a high level of conviction in a stock, and it happens to also have a high short interest all the better.

jcfa2011

This wouldn't reflect, or include, the options on it right?



Edited 1 time(s). Last edit at Tuesday, July 12, 2011 at 11:27AM by ChickenTikka.

ninja1024

No, but you can look at the open interest for the different series of options.

Muddahudda

ChickenTikka Wrote:
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> This wouldn't reflect, or include, the options on
> it right?


I think not. Good question though. Is there some delta adjusted measure of total short interest in a stock that published?