Post by
Joseph_K on Oct 24, 2015 8:24pm
Shorts are NOT back
They are heading for the hills. Heck, they already fled as soon as it started bouncing.
[url=https://www.gurufocus.com/term/ShortInterest/TSX:CXR/Short%2BInterest/Concordia%2BHealthcare%2BCorp]https://www.gurufocus.com/term/ShortInterest/TSX:CXR/Short%2BInterest/Concordia%2BHealthcare%2BCorp[/url]
Check out the bi-weekly short percents at the bottom of the link above. All periods shown are under 1% short. Sure, a month ago the shorts were 50% higher, but that was still only 0.3% more than now. It is like the shorts were never really here. Not when CXR was $100, not when it was $60, and not when it was $40. Now Nobilis, NHC, was beaten down approximately just as much as CXR, and coincidentally has risen just about as fast, had a short interest above 4%. A much more material level for them.
No, this drop wasn't caused by a short attack. It was a bit of unfortunate timing with having the takeover happening when Valiant got attacked. Then it became a whole sector pile on trade where everyone started selling everything, which begat more selling, which begat even more selling and margin calls, until the valuations had become so rediculously cheap that everyone is now scrambling to buy all of their shares back, so that they don't look like fools for selling in the first place.
Come on now, if nothing else was happening Monday, we know the Valiant call would lift the whole sector by itself.
I predict that Valiant closes up 15% on Monday, and another 15% by the end of the week. Or in dollar terms, $176/sh Monday, $202/sh Friday. They will retrench just below the bottom of the range where the drug price fixing controversy dropped it to before the clown attack. Basically still below the late September lows, but still well below the mid-September highs in the $320s. It would need a further 55% jump to get back to where it was in mid-September, and I do think it will get there ($320s), but it might take 9-12 months to do that. The dramatic jumps will be over by the end of next week.
As for CXR, unfairly painted by the whole VRX batch of issues, and caught in the down draft, well, from $44, it would have to go up by more than 100% to get back to the late September timeframe where the knife began to fall for both stocks. It was punished far worse than Valiant, which is why you see it racing back up at a much faster pace. When Valiant was in the $220s in late September, CXR was in the $90s. If Valiant claws back to 90% of that level by Friday, what do you think CXR will do? Could we see $80 by Friday? Could we see the early September highs of $118 again in the next 6 months? I guess it depends on the numbers CXR provides and if they are able to meet them in the next quarter or two.
Maybe. However, I'll make a much less aggressive prediction for CXR. I'm going to speculate that it will jump 16% by the close Monday, and a further 18% by the close on Friday. In dollar terms, $51/sh Monday, and $60/sh Friday.
My numbers might be very low for all I know, as while I expect the big daily moves for VRX to be over by the end of the week, I think CXR could keep having them for one extra week. That might get them to the $70-80 level two weeks from now. But if the market agrees, it might just compress that time frame and also do it in one week.
BTW, CXR was the first major 'health' stock to bottom and start rocketing up. From the sector stocks I was watching, it was the one that triggered the bounce from the bottom. Maybe it was bloody obvious to the smart money that the bottom turn had to start here, as this company was the most unfairly beaten up stock, yet one that was liquid enough that they could load up quickly with it as well.
At least this is how I see what has been unfolding, and these are my non-professional opinions and guesses.
Good luck if you are long, and my sympathies if you are short.
Criticisms or discussion of this post are appreciated. Please share your predictions if you have different ideas for what will happen next week.
Comment by
Joseph_K on Oct 25, 2015 3:14am
Thanks for pointing that out JTCommon. Yes, there has been and will continue to be a lot of short covering south of the border. If the numbers look good on Monday, and if Valiant's call is good as well, then there will be a lot of piling into both companies and the sector as a whole. We might have a whole week of solid daily gains ahead of us.
Comment by
JustforFun7 on Oct 25, 2015 10:20am
well that formatted horribly. Oh well JFF7
Comment by
JustforFun7 on Oct 25, 2015 12:09pm
you make good points. JFF7