Short sellers active ahead of earnings season

This week marks the unofficial start of the second quarter earnings season with Alcoa Inc., first in line to update the market. We look at investor sentiment towards Alcoa and other stocks expected to report earnings including Marriott International, Raptor Pharmaceutical Corp., St. Joe and Ameron International.

Alcoa Inc. (NYSE:AA) is the first major company to report earnings. Short interest has declined with the percentage of total shares outstanding on loan having decreased from over 6% to 4.5% since late April, while the share price has rebounded. Typically the percentage of stock on loan tends to track the share price reflecting convertible arbitrage. But this recent continuous decline in short interest reflects short covering. Meanwhile, institutional ownership has declined by almost 10% over the past two months.

Marriott International, Inc. (NYSE:MAR) will report second quarter earnings on Thursday. Short interest has rebounded from its annual low of 2.5% recorded in May to 4% of total shares outstanding on loan. Institutional investors are increasingly bearish towards this stock, having reduced total holdings by a quarter since November.

Small cap’ pharmaceutical stock, Raptor Pharmaceutical Corp (NASDAQ:RPTP) has seen its share price rally since early May to unprecedented highs, which has caught the attention of short sellers. Short interest has trebled to 11% of total shares outstanding in the last month. In contrast, institutional investors have also been buying into this stock and have doubled their holdings in the past month.

Earnings from Ameron International Corp. (NYSE:AMN) are likely to be overshadowed by the news that National Oilwell Varco Inc. has agreed to acquire the leading pipe producer. Short interest has held steady after a jump to a new annual high of 5% of total shares in April following the announcement, which saw the shares surge.

Finally, the share price of Florida based property group, St. Joe Company (NYSE:JOE) fell last week on the back of reports that the SEC is continuing an informal inquiry. Following a period of short covering as the share price declined, short interest has risen consistently since April from 15% to 20% of total shares.