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The fall of once high flier of VMware (VMW) brings a smile to the StreetGeek's face, since I have been a bear, and was short, on this overvalued stock. Aside from the hype machine, a small float (in essence, shares available for trading) helped lift the stock to absurd levels. In many cases, short selling would keep a stock like this in check, but the restrictive float makes shares very difficult to borrow. The unscrupulous practice known as naked shorting gets around this problem. Here's Investopedia's definition of naked shorting:

The illegal practice of short selling shares that have not been affirmatively determined to exist. Ordinarily, traders must borrow a stock, or determine that it can be borrowed, before they sell it short. But due to various loopholes in the rules and discrepancies between paper and electronic trading systems, naked shorting continues to happen.

Unlike the uptick rule, which is often a scapegoat for recent market volatility (see this paper), naked shorting is a real problem that increases market volatility by allowing nefarious shorts to sell shares that don't actually exist. Some shares are more expensive to borrow than others, but they can be found - Warren Buffet, for example, has loaned out shares that he owns to earn a few extra percentage points on his returns.

It's nice to see that naked shorting is finally out in the public and will hopefully be dealt with accordingly. However, it's not financial stocks that are the true victims. NasdaqTrader publishes a list of stocks exceeding thresholds that violate either Reg SHO or, in far fewer instances, Rule 3210. Of this list of 348 stocks, 36% are OTC issues and a index ETFs and preferreds are also on the list, so we'll focus this analysis on the remaining 214 of Nasdaq listed companies.

With an enormous range of market caps, from Wynn Resorts (WYNN) at over $10 billion to Mesa Air (MESA) at $13 million, it's quite a diverse list of companies. Solar, retail and shipping sectors have a more than their fair share of representation. Of the original 214, only 119 have posted profits in the prior full year with 17 more expected to be in the black in the coming year. Examining the profitable ones, I've identified 13 overshorted value stocks and 16 growth stocks (Become a registered user on Techuities for the Complete List!) that I'm going to do some further research on to and find out if there is a real opportunity to take advantage of the enormous lashback that's due when it comes to naked shorting. In terms of tech, on the value list - Sigma Designs (SIGM), a dirt cheap stock that designs digital video processing chips.

On a completed unrelated note, the StreetGeek found it amusing that Oppenheimer analyst Yair Reiner decided to upgrade Synaptics (SYNA) after downgrading the stock a little over a month ago, singlehandedly resulting in a 7% drop. This doesn't quite demonstrate conviction, but I'm interested to see the rationale as it finds its way through the news wires today. Incidentally, Synaptics is on the threshold list at 42.3% short of float and is one of the 16 overshorted growth stocks in the above list. This is a company that I had pitched in April (see this presentation) that is now really at or slightly above fair value. However, back then, the stock was trading at $25 and 3G iPhone hype was growing strong - Synaptics interface technology is an ideal way for mobile phone manufacturers to put competitive products on the market quickly. That should mean I'll have more "choices" in the coming months to upgrade from my now beaten up Motorola Q.

Finally, I have begun working on a new project that I hope to announce next month. More details soon.

The StreetGeek has had a steak dinner wager on with Morningstar's Pat Dorsey concerning a difference of opinion regarding a certain stock that I'd prefer not to mention. Given the bear market, I think it's safe to say that the StreetGeek is presently in the lead. However, there are plenty of other stocks that we agree on, one of which is Fuel Tech (FTEK). This interesting company is covered by their analyst John Kearney. His fair value estimate for the FTEK is about 150% higher than it's current price. Before we get into fundamental valuation, which is directly tied to the company's market opportunity, it's important to look at some of the highly unusual trading activity in this stock.

First and foremost, it's heavily shorted. With a float of about 14.5 million shares (22.5 outstanding - it has significant insider ownership), FTEK is quite thin. Despite trading an average of roughly 2% of shares outstanding on a given day, the bid-ask spread can often exceed 1% of the stock's price. If you're a long term investor, as the StreetGeek is, this isn't terribly important, but, when it comes to a potential short squeeze, it could make covering a big position quite difficult.

When examining the above chart, it's apparent that short interest has never been higher in FTEK. In fact, 56% of the float is short. That's substantially higher than Overstock.com's (OSTK) 33.8% short percentage (For some older commentary on OSTK and the "cookiness" of their CEO and his quest against short sellers, see "The Other Byrne at Overstock.com" and/or "The CEO and the Sith Lord"). That's a staggering number. Compare that to the most heavily shorted stocks on the Russell 1000 and it would place third on the list. For the small caps, which do typically see higher short interest at the top, FTEK would still be in the top 2%.

So, is it a credit concern that's so pervasive these days? Not really. FTEK has no long term debt and cash on hand that's 140% of its annual operating expenses. The bears are presenting a valuation issue - at 34x forward earnings, first glance makes the stock look expensive in this market. However, there's quite a disconnect given soaring energy prices. FTEK's growth product is Fuel Chem. This product helps utilities and other power generation organizations in two ways - efficiency and emissions. Rather than get into an argument regarding the regulatory environment for emissions, let's focus on the effiency side. Some coal type prices are up 200% YTD, and utility costs across the globe are being pressured. If they can use Fuel Chem to lower maintenance costs by reducing slag and expanding their usable coal types to include cheaper, less pure forms, isn't it a more compelling, globally viable proposition than ever before?

The SteetGeek thinks so and finds it difficult to believe that shares of FTEK are flat while the Market Vectors Coal ETF (KOL) is up 50% in the past three months. With the number of coal fired plants globally at 50,000 and rising, each percentage of market share for FTEK represents a perpetual gross income stream that is greater than FTEK's current market cap. Here's the back of the envelope math (if you would like a much more detailed financial breakdown, please contact us):

Based on this simple estimate, each tenth of a percentage share in coal fired boilers would represent $5 in new value for FTEK shareholders. At just under 25% of it's current price, the risk/reward profile for the stock is quite compelling. While the StreetGeek's heart will always be with the typical tech (software, hardware, internet, etc), I have found FTEK to be far too interesting a story to ignore.

In yet another choppy day for the market, one of the biggest losers in tech space was certainly Comscore (SCOR). Its shares fell 22.5% to close at $21.45 on news of Google's (GOOG) unveiling of Ad Planner. While analysts debate the actual impact of Ad Planner on Comscore's business, when the "data is massaged" (as one of my favorite professors loves to say), it really comes down to two crucial elements: accuracy and independence. Comscore's accuracy has been questioned before.

Here's a three month chart of the stock. While the market is currently fixated on 3, the closing price of SCOR, take a quick look back at late April. Comscore fell nearly 15% to hit its 52-week low at 1 after GOOG's earnings report on April 17th. Some believe that Comscore's click volume numbers had predicted a less than stellar quarter for the search giant, but the numbers proved otherwise. Comscore's management quickly tried to explain the discrepancy. That and an upgrade by Oppenheimer analyst Jason Helfstein at the beginning of May helped the stock recover its losses at point 2. Since then, the stock has taken off and has handily trounced the NASDAQ (red line) with little explanation. This premium amidst a declining market as well as the headline risk surrounding Google's entry are sure to weigh on the stock in the near term and the StreetGeek is staying away until the mid teens. The present valuation simply isn't compelling when compared to other decimated tech names trading at less than half the PEG of SCOR with substantially higher free cash flow yields. Take ValueClick (VCLK), which is sitting on a fresh 52-week low.

While management will try to do some damage control tomorrow, the StreetGeek believes that the long term impact on their business will be minimal. I used to peform analytics on raw Comscore data at a previous job and I've meet with many of their employees at search engine marketing events and related trade shows. They have great people and a good product, but the company also has reputational risks like those that a large financial institution or branded company can face. Yet as long as Comscore's data is accurate and independent, all will likely be well. Every technology company faces accuracy issues in data collection and processing - even Google - and, the StreetGeek knows, because he has, on several occasions, had to correct their blunders. Being consistently accurate is the key, and Comscore has proven that. Will the competition be produce more accurate data? Perhaps, but why hasn't Amazon (AMZN) been able to do that with Alexa? Clearly, Amazon's source of revenue is different than Google's and Alexa is more of a standalone offering rather than something that integrates well to deliver more value to the customer.

Finally, the customer needs independence. If your business is looking to advertise on a traditional medium, such as television or print, are you going to blindly take the reach metrics from that medium's sales force? To commit major advertising dollars, one would need more than NBC's reassurance that the upcoming Beijing Olympics will have billions of viewers. The StreetGeek can almost hear the pitch now - "Well, everyone in Asia will be watching it, and that's two billion right there." The truth is, this is how Nielsen built their business - on independence, objectivity and system-wide comparative ability. It's also why Nielsen has worked so hard to build a digital platform. If Google is to truly be effective in this product line in the long run, it will be another serious challenge to the upholding of their corporate motto. Now more than ever, big G is being watched.

There's quite a bit of talk these days about who is to blame for the economic mess than we're in right now. Since this is such a hot topic of discussion, I thought I'd put some of my "free" time to good use and take up a long overdue entry that has little to do with technology. Let's briefly examine some of the candidates:

But the StreetGeek would like to offer an alternative. A number of weeks ago, during a discussion with an interviewer at a potential employer, I had mentioned the timing of my completion of undergraduate studies. Sure, enough, I graduated with a degree in computer science in May of 2001. This person hinted, in a joking fashion, that it was my fault that financial companies were sufffering. Well, let's take a closer look and compare the PowerShares QQQ during the turn of the century (Sep 1999 - June 2002) with the current state (May 2006 - Present) of the Financial Select Sector SPDR:

1) Start of Final Year of Undergraduate Education
2) StreetGeek's Graduation