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Why Albemarle’s Short Interest Increased After Its 3Q17 Release

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Albemarle’s short interest

As of January 31, 2018, Albemarle’s (ALB) short interest had increased in a big way since its 3Q17 earnings announcement on November 8, 2017, which indicates bearishness. Between November 8 and January 31, ALB’s short interest as a percentage of outstanding shares rose to 8.2% from 5.4%, and its stock price fell from $111.59 to $140.84.

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Why did Albemarle’s short interest rise?

Albemarle’s short interest increased primarily because of news that SQM’s dispute with Chile’s economic development agency had been resolved and SQM was approved to significantly increase lithium production, which could result in an oversupply of lithium and bring down lithium prices. As a result, lithium stock prices plunged.

Peer comparison

ALB’s short interest was ~9.0 million shares, and its average trading volume was ~1.8 million shares, meaning a short interest ratio of ~5.1x. This figure indicates that it would require five days to cover short positions.

In comparison, FMC’s (FMC) short interest was 3.8 million shares, and its average trading volume was 1.3 million shares, meaning a short interest ratio of ~3.0x. This figure indicates that it would take three days to cover short positions.

SQM’s short interest was 4.7 million shares, and its average trading volume was 1.3 million. It would take four days to cover short positions.

Investors can indirectly hold Albemarle through the PowerShares WilderHill Clean Energy Portfolio ETF (PBW), which has invested 2.3% of its portfolio in Albemarle. The fund also provides exposure to Air Products (APD), of 2.8%.

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