Shorts Crucified As Most Shorted Russell 2000 Stock Gets Takeover Proposal
As we pointed out a month ago (and initially over a year ago) in this completely broken, levered-beta, mad dash for yield market, the only alpha-generating strategy that even remotely works, is to be long the most shorted stocks. This was confirmed based on the 1 year "New Normal" return of the S&P vs the "most shorted sotcks" - a trade we first suggested in September 2012 - demonstrated by the chart below.
Amusingly, as part of the trading basket of only stocks worth owning, i.e., the most shorted ones on the Russell 2000, where the beta is by far the highest, the top stock listed, the one with the highest short interest as a percentage of the total float, was none other than Blyth, Inc., as per the chart from one month ago.
According to the latest Bloomberg data, since then the short interest only rose even more, hitting an unprecedented 82.79% of all shares in the float held short.
Well, overnight a lot of shorts suddenly screamed out in terror and were suddenly silenced, not to mention carted out feet first, when none other than the most shorted Rusell 2000 stock received an unsolicited takeover proposal valuing the stock at $16.75/share, and sending it to the highest level since May.
Blyth, Inc. (BTH), a direct to consumer company and leading designer and marketer of health & wellness products, beauty products and candles and accessories for the home sold through the direct selling and direct marketing channels, today confirmed that it has received an unsolicited proposal from CVSL, Inc. to acquire, subject to conditions, all of the public common shares of Blyth for a per share consideration of $16.75, or approximately $269 million payable in CVSL shares or cash.
The proposal is conditioned on diligence and the negotiation of definitive documentation and is not supported by financing. The proposal references a meeting last week between principals of Blyth and principals of CVSL; the Company noted this meeting was held at the request of CVSL and the principals did not discuss a business combination of Blyth and CVSL.
For the shorts who still believe in a rational, fundamentally-driven market: our condolences. For everyone else - just keep betting that career-risk driven idiocy will be the dominant investing strategy until the Fed's central planning implodes, and buy what that anachronism in a market without risk, hedge funds, are shorting the most.
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