I have a question regarding stocks. I was doing some research the other day, and stumbled upon United Natural Foods, Inc. which is a national distributor of organic foods (like to Whole Foods). I think given the fact that Wal-mart is taking over the world, UNFI might be a safe bet in the future (can't see Wal-mart taking over this sector anytime soon).

While researching this stock, an interesting figure bubbled up on the Yahoo! key statistics for UNFI:

  • Shares Short (as of 10-Mar-06): 5.58M
  • Short Ratio (as of 10-Mar-06): 14.5
  • Short % of Float (as of 10-Mar-06): 13.40%
  • Shares Short (prior month): 5.17M

This stock is overshorted like crazy! I couldn't find any other companies (off the top of my head) which had a short ratio this high.

Now take a look at the Google snapshot since March 10th; almost no change in the stock price.

So my question: If UNFI hits enough momentum and starts going up, any gains will be amplified by shorts who will have to cover. Is this reasoning correct? Given the fact that the financials on the company seem quite solid (I would probably do a more indepth review before actually buying), this might be a good stock to hold onto for a year - if next quarter's earnings are spectacular, I could see a huge gain...

Is my reasoning regarding the short ratio and momentum correct? Anyone know for sure?

Posted by roy on April 23, 2006 at 12:07 PM in Finances | 4 Comments

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Comment posted on April 25th, 2006 at 09:11 AM
http://finance.google.com/finance?q=NTRI still has you beat on the one-day gain ;)
Comment posted on April 25th, 2006 at 09:19 AM
did you invest in nutrisweet? =P
i dumped money in lvlt. they hit big a few weeks and i pulled.. they slipped and i reinvested.. played both cycles and now i'm dancing. =)
Comment posted on April 25th, 2006 at 09:07 AM
POP goes the weasel, although i'm wary anytime i see "loss widens"