# GME (Gamestop - short squeeze candidate?)



## PMREdmonton (Apr 6, 2009)

I was just running a screen to see if there were any companies that would be good candidates for a short squeeze.
I just checked to make sure PE<15, FPE, 15, Short float > 25%, Insider transactions > 5% positive, LT debt/equity < 0.5 and P > SMA50.

The only stock meeting these criteria was GME.

I know some have been down on the stock because they see the industry going digital and in the long run this may be true. So this could be a value trap eventually but the company is still profitable, they have a loyal customer base, they make lots of money by allowing trading-in of games (with large margins) and most games are still sold at stores.

Right now analysts are calling for an avg stock price of 30 so the stock is 25% undervalued by this metric and still is growing y/y and there is expected earnings growth this year.

Earnings are tomorrow and if they are positive this would seem to be a good stable candidate for a short squeeze. If they are positive the stock could go up and force the shorts to close their position. The shorts have taken a 40% position of the float so the stock could go up strongly.

I thought it was a good one to put on your radar for those who want to trade.

Any opinions?


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## Argonaut (Dec 7, 2010)

Looking at the stock reminds me of Activision/Blizzard, which Causalien I think uses as a reverse-indicator of market direction. Same realm of business obviously.

I don't have anything else to add, but I'll watch the earnings tomorrow with you. Not interesting as a long term holding, but you may be right on a trade.


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## avrex (Nov 14, 2010)

I like your thinking on *GME*.
Yes, it is a potential play.

The following author also agrees with you.
6 Potential S&P 500 Short Squeeze Plays (Thursday March 15, 2012)
The other one that I liked on his list was RRD. However, RRD has risen > 5% since this article was written on Thursday. Perhaps we've already missed out on the start of this breakout.

I am currently involved with one sort-of short-squeeze play. Back on Feb 29th, I took a long position in BBY, which has a relatively high short ratio. I am currently up on this trade [24.70/26.12]

p.s. GME earnings will be Thursday, March 22, 2012.


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## rookie (Mar 19, 2010)

at what short % of float does the short squeeze play begin and how exactly does it play out?. i just opened a short position on SIMO (by buying SEP 20 put options). i am noticing that the short position is increasing rapidly and now stands at about 6% of the float. the stock is up significantly in the last couple of weeks. i hope it is not because of the short squeeze. i do not want to get burned!!!


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## avrex (Nov 14, 2010)

rookie said:


> at what short % of float does the short squeeze play begin and how exactly does it play out?. i just opened a short position on SIMO (by buying SEP 20 put options). i am noticing that the short position is increasing rapidly and now stands at about 6% of the float.


Hey rookie, 
To be honest, I'm not really sure if I know, or could tell, if a short squeeze is taking place. For a company with a high short ratio, does the price of a stock move up rapidly because a) the short seller is buying back and closing his position or b) are other events related to the compnay causing the stock to move up. We may not know for sure (except maybe many days later, when we check to see what the latest short ratio report shows.)

I do like to follow the short ratio to be aware of what the sentiment of those traders is like.
(Short Interest Publication Schedule)

For the stock you mentioned, SIMO, the short ratio seems average. Not too high, not too low. 
The float you mentioned is somewhat high, but not ridiculous, so I wouldn't worry about that. 
I don't believe SIMO is in any danger of being involved in a short squeeze.
(btw, what was going on with SIMO today? Up 6% today and then down 6% after hours. weird.)


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## PMREdmonton (Apr 6, 2009)

The shorts jumping in will be good for your cause as their dumping of the stock in the market will push the stock down in the short-term. That may create the conditions for you to exercise your put at a profit.

At 6% short ratio though, there is very little risk of a significant short squeeze ever occuring.


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## rookie (Mar 19, 2010)

PMR, i thought so too. but the significant run up without news caused some concern.

@avrex, no idea. i have a gut feeling that the margins for LTE solutions will be running out soon as more players will now have solutions. example is qualcomm winning the ipad3 design. the other leg of SIMOs business is flash memory and this business hardly has any margin at all.


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## avrex (Nov 14, 2010)

Well it's a good thing that none of us are long *GME.* Down 6%.
I guess the shorts were correct.


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## PMREdmonton (Apr 6, 2009)

Yes, earnings were upbeat but guidance was lower as they focus on expanding digital distribution of media.

However, I still think this one bears careful watching because the company is now debt-free and spewing free cash flow. They have decided to initiate a share buyback program of $500M which is about 14% of all existing shares. If they decide the company is undervalued right now and start releasing those funds the stock price could shoot up causing the shorts to become squeezed and close out their positions.

I still am watching this one for a run-up in price.

CJES is another good one and had a bit of a short squeeze earlier this year before fear started to crush the hydraulic frac companies. This one still is a potential short squeeze candidate if things get rolling.


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