10. Days to Cover - The NASDAQ Dozen

Days to Cover, the next metric in your stock analysis, is located on the Short Interest page. To access it, click on the Short Interest link under the Fundamentals heading in the left menu (see Figure 16).

Short Interest Link
Figure 16—Short Interest Link
Why We Look at Days to Cover

Short interest is the number of shares that investors are currently short on a particular stock. Days to cover is the number of days---based on the average trading volume of the stock---that it would take all short sellers to cover their short positions.

For instance, if a stock has a short interest of 20 million shares and an average trading volume of 10 million shares, days to cover would be two days (20 million / 10 million = 2 days).

How to Score Days to Cover
  • Pass—Give Days to Cover a passing score if the number of days is less than 2 days.
  • Fail—Give Days to Cover a failing score if the number of days is more than 2 days.

Looking at Days to Cover for WMT in Figure 17, WMT should receive a failing score. You can see that WMT’s Days to Cover is more than 2 days.

Days to Cover: FAIL

Days to Cover
Figure 17—Days to Cover

  All content in this article is supplied by Wade Hansen of Learning Markets. To learn more about their investor education offerings, please visit learningmarkets.com. Find more great articles from Learning Markets in our news sections.

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