Short Washington Mutual Inc. (WM) on Market Weakness
Jun
3
Written by:
6/3/2008 10:31 PM
Short Washington Mutual Inc. (WM) on Market Weakness
Today was a
very weak day for financials as Lehman led a number of Financials and the
S&P 500 down in early afternoon trading. The biggest new 52 week lows were
almost entirely bank stocks. Wachovia, Bank Of America, Washington Mutual, Regions
Financial, Fifth Third Bank and Keycorp all made new lows. Washington Mutual
looks the weakest to me of the bunch.
Washington
Mutual (WM) didn’t collapse the way Lehman Brothers has fallen the last two
days but after removing one its board members, fell 2.78% on the day. Analysts
have marked down their estimates for the current quarter from a loss of 0.25
cents to a loss of 0.87 cents in the past 90 days. For the current year,
analysts are looking for a loss of $2.92 for the bank where three months ago
they were expecting a loss of only 0.92 cents.
The stock
is down 80% over the past year and has a short position of 18% of the float.
The bank stocks could experience a rally and a stock with this much of a short
position could be squeezed higher on a big rally day. But with the market
struggling, the DOW in a new correction, and financials showing additional weakness,
I think you can short Washington Mutual for a short term gain.