Blackberry shareholders get a taste for what might be in store – Part II

Better than expected results could result in a big move.

Iain Butler

Chief Investment Advisor, Motley Fool Canada Fool since November 2012 Iain Butler, CFA, is Lead Advisor on Discovery Canada 2017. He is also the Chief Investment Advisor for Motley Fool Canada and is the lead advisor on its flagship Stock Advisor Canada product. Before joining the Fool, Iain was a “buy-side” analyst and through this experience is well-versed in the idiosyncratic ways of the Canadian market. His investing interests are centred on scouring the market for interesting businesses that trade at reasonable prices and offer an appealing risk/reward relationship. Since joining the Fool in 2012, Iain dedicates each day to spreading Foolishness throughout this great country!

Published May 9, 2013 10:36 am EDT

About a month ago, after hosting a well-received analyst day, U.S. company First Solar (NASDAQ:FSLR) saw its stock price soar by about 46% in one day. Much of this gain was attributed to a massive short squeeze as the company entered the analyst day with an outstanding short interest of 21% of shares outstanding.

Today, we have two more companies enjoying a similar dynamic on the back of better than expected quarterly results. According to Capital IQ, Tesla Motors (NASDAQ:TSLA) and Green Mountain Coffee Roasters (NASDAQ:GMCR) entered today with outstanding short interests of 24% and 22% of shares outstanding respectively. Given their positive quarterly results, short sellers are seemingly running for cover as the Telsa’s stock has jumped 23% thus far, and GMCR is up 18%.

What about Blackberry?

Though Blackberry’s (TSX:BB,NASDAQ:BBRY) stock isn’t having nearly the day that either of these stocks are having, someday it could. You see, whereas all three of the names mentioned had short positions in the low 20% range, Blackberry’s current outstanding short interest measures 31% of shares outstanding.

While this has absolutely nothing to do with the underlying, long-term “value” of the company, because of this massive short interest, if Blackberry is able to show better than expected sales of its new devices at some point in the relatively near future, its stock price is likely to behave much like these other 3 names, at least for a day or so.

Foolish takeaway

Playing a stock for a move that may not occur because of an outstanding short position isn’t what Foolish investing is all about. However, if one day you wake and see BB shares trading higher by 40% or so, you’ll know there is a massive short squeeze underway.

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Fool contributor Iain Butler does not own shares in any of the companies mentioned in this report at this time. David Gardner owns shares of Tesla Motors.