Top 5 Most Shorted Internet Stocks

Starting off the year I thought it might be interesting to review just which Internet stocks have the biggest short positions on them. Short positions are typically taken by professional investors so looking at the Top 5 Short Positions is a good way to get of sense of just which stocks professional investors dislike the most.

Each month the stock exchanges publish the number of shares sold short in a particular stock.  If you compare the number of shares short to the total float (basically total shares less insider shares) it's a good measure of just how "short" the stock is .  As of the end of 2005 here were the Top 5 Internet Short Positions:       

1. Overstock.com    Ticker: OSTK
   % of Float Short: 59.8% 
   PE: NA  Market Cap/Tangible Book: 6.9
   Comment: The shortest of the shorts.  Overstock's CEO has been having a very public and highly amusing battle with short sellers which, thanks to the increasinly poor performance of the company, he appears to be losing.  Not only was Overstock was one of 2005's worst performing Internet stocks, but Overstock gave short sellers a belated Christmas present when they preannounced shortly after Christmas.  Sometimes the pros are right.
2. Netflix    Ticker: NFLX
   % of Float Short: 38.7%
   PE: 68  Market Cap/Tangible Book: 11.7
   Comment: Then again, sometimes the pros are wrong.  Despite a very strong short position all last year, Netflix closed out the year as one of the best performing Internet stocks thanks to an improved financial and strategic position.  The pros appear to think that Netflix is still destined to come back to earth, but it is clearly in a lot better shape than something like Overstock.
3. J2 Global Communications   Ticker: JCOM
   % of Float Short: 22.2%
   PE: 21.7  Market Cap/Tangible Book: 7.0
   Comment: The king of e-faxing which owns such websites as Efax and Onebox has seen its short interest increase substantially throughout all of last year apparently as people bet that faxing will go the way of the quill pen. (I for one will never fax another document after figuring out how to just scan and .pdf them).
4. Digital River    Ticker: DRIV
   % of Float Short: 21.9%
   PE: 24  Market Cap/Tangible Book: 11.6
   Comment: Short interest in this stock more than doubled in 2005 and yet the stock was only down 15% or so.  Looks like the pros are still expecting a big downside move.
5. Priceline    Ticker: PCLN
   % of Float Short: 19.9%
   PE: 16.9  Market Cap/Tangible Book: 49.6
   Comment : It's kind of ironic that both Priceline's customers and a lot of investors are all hoping to get a lower price but aren't sure what will happen.  While short interest is still high, it was almost twice as high at the beginning of last year, so many of the pros have clearly given up on this short already.