The Shorts Like This Beachwear

For a small company that's hardly known on the Street, Quiksilver, a maker of beachwear and casual clothes, has been getting lots of attention--from the shorts. Of its 6.1 million shares outstanding, some 20% are in the hands of corporate insiders, leaving a float of about 5 million shares. What's intriguing is that some 700,000 shares, or 15% of the float, have been sold short--by some pros who are betting the stock will soon slump.

The shorts note that John C. Warner, who has given up the job of chairman and CEO to join the company's newly acquired Na Pali unit in France, sold 67,000 shares of his 100,000 shares. So they suspect that problems lie ahead and that the stock will fall below 10 from its current 12.

Yet the stock has strong supporters. These bulls believe that Warner will help boost sales in France. His sale of stock was prompted by his need, says a Quiksilver executive, to raise cash for his move to France. Moreover, notes one New York money manager, the company will report surprisingly good numbers for the July quarter. And he thinks the 1992 earnings will benefit from a new market: department stores. Part of this pro's confidence stems from the recent hiring of Shaheen Sadeghi as President. He headed design and merchandising at rival Gotcha, which sells to department stores.

This money manager says the stock could double in a year as earnings improve. He figures profits will rise to $1.60 per share next year from an estimated $1.30 this year. "If there's a panic to cover by the shorts, that's a welcome bonus," says this investor.

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