Small cap NYSE stocks Blyth, Inc (NYSE: BTH), ITT Educational Services, Inc (NYSE: ESI) and U.S. Silica Holdings Inc (NYSE: SLCA) had the highest short interest as of late September according to HighShortInterest.com with short interest of 56.80%, 55.73% and 40.22%, respectively. However, shorting a stock can be a dangerous business as the bears can and do sometimes get mauled by the bulls. With that in mind, let's take a look at why the bulls or the bears may be right or wrong about these three shorted small cap NYSE stocks:
Blyth, Inc. A designer and marketer of an extensive line of scented candles and related accessories, seasonal decorations, home decor and household convenience products, small cap Blyth sells its products in North America and Europe through two channels of distribution: Direct Selling and Catalog & Internet. Blyth, Inc's troubles seem to stem from its stake in multilevel marketing company Visalus, who was supposed to have an IPO but that's since been called off. Moreover and back in August, Blyth, Inc reported a 3% sequential sales decline to $101.5 million but prior year second quarter sales were $190.4 million – meaning sales, at least for Visalus, have basically collapsed by 47%. Sales for PartyLite (candles and home décor) also sank 12% to $77.8 million thanks to fewer sales associates in many of its bigger, more mature markets; but Miles Kimball sales (catalog and online sales) rose 4% to $32.4 million thanks to a double-digit increase in the sales of health and wellness products and increased sales associated with the new Miles Kimball credit program. Nevertheless, it should be mentioned that Blyth, Inc has been accused in the past (by trial lawyers) of overstating the nature and viability of Visalus' financial results to mask declining performance in other operating units. On Monday, Blyth, Inc fell 3.82% to $12.59 (BTH has a 52 week trading range of $8.65 to $27.03 a share) for a market cap of $201.60 million plus the stock is down 15.9% since the start of the year, down 50.2% over the past year and down 37.6% over the past five years.
ITT Educational Services, Inc. A provider of accredited, technology-oriented undergraduate and graduate degree programs, small cap ITT Educational Services owns and operates more than 140 ITT Technical Institutes and Daniel Webster Colleges serving approximately 59,000 students at its campuses in 39 states and online. Since early August, Blum Capital Partners LP has been a steady seller of shares according to insider trading data on Yahoo! Finance. Blum Capital Partners LP owned 1,412,288 shares (23.37 million shares are outstanding) as of last Wednesday. Back in July, ITT Educational Services reported that profits fell by nearly half in the second quarter while total enrollment fell by 11.7% to 58,617 but new enrollment was up by 7.5%. Not helping matters are the stricter new regulations on recruitment and marketing by for profit education companies. However and given the government shutdown and other distracting battles in Washington, bulls and bears alike might want to keep an eye on ITT Educational Services' insider trading data as well as wait for the next earnings report. On Monday, ITT Educational Services fell 1.83% to $29.56 (ESI has a 52 week trading range of $11.69 to $32.77 a share) for a market cap of $690.78 million plus the stock is up 69.4% since the start of the year, down 4% over the past year and down 61.1% over the past five years.
U.S. Silica Holdings Inc. A leading producer of industrial minerals, including sand proppants, whole grain silica, ground silica, fine ground silica, calcined kaolin clay and aplite clay, small cap U.S. Silica Holdings' products are used in products for the oil and gas, glass, chemicals, foundry, building products, fillers and extenders, recreation, industrial filtration and treatment, and testing and analysis. Last Thursday, U.S. Silica Holdings actually hit a new 52 week high after Morgan Stanley initiated coverage with a buy rating. Moreover, Investor's Business Daily pointed out that U.S. Silica Holdings gets about 60% of its revenue from the energy sector as production ramps up in the shale fields in Texas, West Virginia and the Dakotas while revenue from its oil and gas division surged 43% to $77.7 million last quarter. Nevertheless, shares did fall after the last earnings report apparently because Wall Street's expectations were too high but with a reasonable trailing P/E of 19.50 and a forward P/E of 13.15, one does have to wonder if the shorts are on the wrong side of the trade here. On Monday, U.S. Silica Holdings rose 1.27% to $28.67 (SLCA has a 52 week trading range of $12.37 to $29.40 a share) for a market cap of $1.52 billion plus the stock is up 81.1% since the start of the year, up 109% over the past year and up 77.8% since February 2012.
Finally, here is a look at the long term performance of all three small cap stocks:
As you can see from the above chart, only U.S. Silica Holdings has been a winner for investors and even it has given investors a bumpy wide. But looking at the technical charts, Blyth looks bearish while the charts for ITT Educational Services and U.S. Silica Holdings look more bullish.
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