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ITT Educational Services Inc. Message Board

  • ejtrewni ejtrewni Jan 29, 2013 9:29 AM Flag

    Short interest up from 7.5M to 8.8M this month...

    hopefully resulting in a short squeeze this year. I doubt they start covering until this reaches $30 or $40 though since they are up so much. Gonna be some wild swings up and down when this much of the float is shorted. 15M float almost 9M shorted!

    Sentiment: Strong Buy

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    • Numbers indicate 23 million shares outstanding. Top holders have roughly 15 million shares locked up. These are institutions that do not see to trade very much. So floating shares is 23 -15 = 8 million. Shorts have obviously borrowed stock from the above mentioned long term holders. Problem on the short squeeze side is that the long term holders are selling their positions to people that will call the stock loans in. Short are well aware of this. Shorts see no shareholding movement among these players, so borrowing stock from them is safe. Stock loan clerks at the brokerage firms that lend shares to the short sellers also see this.

      If there are 8 million shares in the effective float. The shorts have shorted 9 million shares (but remember, the shorts borrowed their shares form the other 15 million long term holders). That means that there are 17 million shares owned outside the core long term holder base. That is enough to support a large short position if 1) the long term holders continue to lend out shares and 2) there are no new large buyers that come into the stock. Since ESI share price has been so weak, new big long players have been staying away. That means #2 above has yet to happen. For #2 to happen, ESI fundamentals have to shift to the positive and I think that has happened. Why?

      A. All the RSAs (2007 RSA, 2009 RSA and the PEAKs RSA) have been reserved for in full in my opinion. The 2007 RSA was fully taken care of. The other two still have some risk, but I think that the risk is now insignificant.

      B. Cohort default rate data coming up looks great.

      C. I think that the earnings for 2013 are conservative and we are at or close to the earnings bottom.

      D. Company's plan regarding scholarships has the opportunity to break the downtrend in new student signups.

      E. Company's cash and liquidity situation remains solid.

      F. No stock buybacks currently, but I think that they will resume later in 2013.

      G. Management making a solid effort at providing better transparency, particularly re the RSAs.

      H. Valuation is absurdly low.

      Sentiment: Strong Buy

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