Why Is this Stock at the Top of the TSX Short-Sellers List?

Which stock are investors most bearish on? Badger Daylighting Ltd. (TSX:BAD) currently tops the TSX short-sellers list. Let’s find out why.

| More on:

It’s always interesting to see which TSX stocks top the short-sellers list. Why? We can gauge which stocks the market seems most bearish on. You can measure this number based on total shares or by a percentage of shares. Looking at percentages, the stock currently topping the TSX short-sellers list is Badger Daylighting Ltd. (TSX:BAD).

Badger provides hydrovac excavation services. (I explained what that is when I first talked about Badger back in October for anyone who’d like to know.) Currently, 24.3% of Badger’s outstanding shares are borrowed by short sellers. That’s a lot of shares.

Why so bearish?

Some investors are worried about how Badger reports revenue. Fool contributor Joey Frenette did a good job of explaining how Badger essentially counts its chickens before they are hatched in this summer article. Other investors feel the stock is overvalued and has seen increased competition that erodes its competitive advantage. The stock’s price has taken a hit over the last year, coming down from a high of $36.22 in March to trade around $26 per share now. (The stock hit a low in May and has been a bit up and down since then.)

On the other hand…

Not everyone agrees with the negative view. In terms of results, Badger looks good. Sales and profits have steadily increased this year. Expenses are holding fairly steady. Some analysts are puzzled about the stock’s recent performance and short selling, seeing good results and value in the company.

One in particular, Brian Pow from Acumen Capitalist, and this to say about the stock in the Globe and Mail:

“The growth focus is in the U.S. where there is less competition and the company is well on its way to its goal of doubling its U.S. business in the next three to five years. We also believe BAD will be one of the names in our universe to benefit the most from the U.S. tax changes in 2018. The benefit of the accelerated depreciation is particularly attractive as BAD is currently sending most of its trucks to its U.S. operations. We would take advantage of the current price as we expect street estimates to be revised upward to reflect a faster pace of truck manufacturing to support its growth objectives.”

Bottom line

If the U.S. pulls out of NAFTA, that could negatively affect anyone doing business south of the border, which would include Badger. I understand the accounting concerns, but I think everything else looks fairly solid for the stock. If you are looking for a construction stock, keep your eye on Badger Daylighting.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Susan Portelance has no position in Badger Daylighting. Badger Daylighting is a recommendation of Stock Advisor Canada.

More on Investing

money cash dividends
Dividend Stocks

Want Passive Income: Hold This Canadian Dividend Growth Stock Forever

Passive income seeking investors can now buy shares of dividend-paying blue-chip companies at a discount, such as Brookfield Infrastructure.

Read more »

Modern buildings in business district
Bank Stocks

TD and CIBC Stock: 2 Top Banks to Buy for Big Yields

TD Bank (TSX:TD)(NYSE:TD) stock is a dividend juggernaut that's a must-buy for its cheap yield.

Read more »

Gold bars
Metals and Mining Stocks

Gold Stocks That Could Soar if the Fed Pauses Rate Hikes

In choppy waters, two gold heavyweights look too good to pass up right now given their lowered entry points, dividend…

Read more »

Clean energy
Energy Stocks

Better Buy: Renewable Energy or Uranium Stocks?

The world is shifting towards clean energy sources, creating investment opportunities in the renewables sector. What's a better bet: environmental…

Read more »

retirees and finances
Energy Stocks

These 3 Stocks Can Help Make You Richer by Retirement

Future retirees can be rich in their sunset years with the help of three distinguished dividend-payers on the TSX.

Read more »

A worker uses the cloud for paperless work. tech
Tech Stocks

Why I Think Constellation Software (TSX:CSU) Stock Has Market-Beating Potential

Constellation Software (TSX:CSU) could outperform the market over the next few years.

Read more »

data analytics, chart and graph icons with female hands typing on laptop in background

Got $5,000? These Are 2 of the Best TSX Growth Stocks to Buy Right Now

Canadian investors with some extra cash on hand should look to snatch up TSX growth stocks like goeasy Ltd. (TSX:GSY)…

Read more »

Senior Couple Walking With Pet Bulldog In Countryside
Dividend Stocks

Retirees: 2 On-Sale TSX Dividend Stocks to Buy Now for Passive Income

These top TSX dividend stocks now offer 6% yields.

Read more »