Is Headwaters (HW) Still Too Spooky?
Now things are starting to look a little interesting in the world of Headwaters (HW). From it’s 52-week low (intraday) on October 25th at $13.16, it has risen a shade over 9% at the close of the market today ending at $14.35. Several things are interesting to me now (instigated because I currently have an embarrassingly large percentage of my portfolio invested in it 
):
1) I think the bottom may have passed
After hitting that ugly low, it has risen for five straight sessions while the S & P 500 has risen on only three. Of course, it does this periodically, so I am interested to see if this one sticks. Also, every morning for the last several days, it has softened, then has come back strong to finish higher than the previous close. See next point.
2) A possibly remarkable changing of hands might be occurring
Why could it be behaving like this? Two things of particular note are the most likely factors. For one, it has a ridiculously high institutional ownership (almost all), and it has a relatively high short interest (better than 28%). So why the morning doldrums? If the shorts are covering, then someone has to be selling. So it must be the institutions, or, there are more people shorting the stock, which would be very risky so near it’s 52-week low. But then again, if either the institutions are selling or the shorts are covering, then who’s buying in the afternoons? Are the institutions selling while the shorts are covering? Talk about a battle. But keep in mind, “smart money” is called that for a reason. Surely there isn’t enough covering going on to outperform institutional liquidating. Of course, another option is still possible: some institutions want out while others want in. All in all, it’s seems too early to tell. I’m just going to have to keep watching.
3) Earnings are out this coming Tuesday
This will be the most remarkable event. Until now, everyone has the same data. Everyone with an interest in this stock knows the risks, knows the whole story. Here is what I look forward to this coming Tuesday: a glimpse of just how well they have diversified away from the revenue stream only available to them previously, that was only available to them through a federal subsidy. I’m not sure if this last quarter will be the decisive one, but I think it will be better than most have been thinking it will. Check back on Tuesday.
Here is the 5-day chart for Headwaters (click to enlarge):
Keep up the updates with a future post on this topic. I think this blog has been doing great so far. Keep up the good work.
Thanks for posting Donald, I’ll keep it up. I should have some things to say, about this specifically, on or right after Tuesday.