Friday, March 03, 2006

First Marblehead Update

First Marblehead (FMD) has been really surging lately. The company is showing the world that its profitability is not being affected in the way that many bears were predicting. As a result, the stock continues on a strong upward path. The great thing is that there are still a ton of shares shorted.

Here are the latest numbers as of Feb 28, 2006 from the NYSE:

Shares Short - Jan 31, 2006 - 12,999,664
Shares Short - Feb 28, 2006 - 14,597,891
Avg Daily Volume - 659,564

The bears have continued to short the stock, increasing their short positions by about 12% in the last month. This brings the short ratio to 21.2. Over 21 days of average volume trade just to cover the short shares! Very dangerous to short a stock with such a high ratio. If you ever decide to short such a stock, you better be damn sure you're right. If the company continues to move higher and show good news, the shorts will be squeezed hard. This squeezing effect is probably happening now.

Tom Brown, an amazing financial services analyst, has been very bullish on FMD in the last year.

Links to Tom Brown's FMD articles can be found here:

Oct 12, 2005: The Farther It Falls, the More Attractive It Becomes - FMD at $23.25
Nov 3, 2005: A Huge Overreaction - FMD at $25
Dec 8, 2005: Bears On The Run - FMD at $32.75
Dec 15, 2005: A Positive Not A Negative - FMD at $28.75
Dec 19, 2005: The Mystery Of Biv930 - FMD at $29.50
Dec 21, 2005: Listening To the Education Lenders - FMD at $31
Jan 6, 2006: Just Askin' - FMD at $32
Feb 9, 2006: Looking Ahead With First Marblehead - FMD at $36.50
Feb 23, 2006: More Partners, More Services, More Deals - FMD at $36.75

Today... FMD sits at $41.75. I fully expect the short squeeze to continue. Gotta love this great move to the upside.

No comments: