Epic short squeezes have been a common theme of the 2013 bull market. With heavily shorted names such as NFLX,TSLA, and even P rocketing higher 2013 is not a good year to play the bear. Sure we have this government shutdown, the debt ceiling, the sequester, and all the other washington charades that keep popping up and disturbing the stampeding bull market. However, it is my opinion that sooner or later those tea party extremists are going to cave and all will be well with a nice rally to show for it.
Take Blyth (BTH) With over 85% of shares outstanding sold short, this is one of the most heavily shorted names in the market. In 2012 this once proud company was standing strong at a price tag of $45. Today BTH is trading at around $13 nearly a 71% discount to the highs. BTH does a couple things. Focusing heavily on direct selling they peddle scented candles with their PartyLite brand. In 2008 they acquired a nutrition and weight loss supplement brand name ViSalus Sciences. There was some trouble in July of 2012 with Visalus, they were trying to spin it off and then the SEC got on their backs over some 'misleading statements.' Theres been a lot of controversy of direct level marketing with the whole Herbalife (HLF) Ackman thing. Im not here to discuss the virtues of direct level marketing however imo its not so bad as it provides the average Joe a source of making some income.
Enter this new small company CVSL. CVSL is a company who focused on direct level marketing, they have been making strides this year with the acquisition of many direct selling companies such as Longaberger, Tomboy Tools, Your Inspiration at Home, and Agel. In a recent conference call the current CEO, former CEO of Mary Kay Mr. Rochan had expressed an interest in 'becoming a major shareholder of Blyth." CVSL has been acquiring shares of BTH on the open market.
BTH has a public float of 6,500,000 shares. Of those outstanding shares according to shortsqueeze.com 5,567,300 are sold short. With some further catalysts, and some more press it is my hypothesis that we could see short sellers scramble to find available shares to cover. In a similar situation Volkswagen briefly became the most valuable company in the world when Porsche announced that it was aggressively increasing its stake in the company causing the then 12% short float short sellers to cover pushing the price of Volkswagen stock up 4x in a few days. Well if a measly 12% short float could do that to a company, just imagine what a 85% short float could do.
IMO people who continue to short BTH after 75% gains are being pigs. Unless they expect the company to go to zero (an unlikely proposition, if anything CVSL would acquire it) they would be wise to cover their short positions before further catalysts cause a squeeze of epic NFLX, Volkswagen like proportions.
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