New Gold Sees Its Short Interest Soaring 32%

New Gold Inc. (NGD) saw its short interest on the TSX climb from about 24.7 million shares to roughly 32.6 million shares, as of February 15, 2012.

The increase represents about a 32.2 percent increase from the short interest on January 31, 2012.

As the chart below illustrates, the rise in short interest took place as the stock began to decline from a $12.45 in the beginning of the month, to a recent low of $10.98, a decline of about 11.8 percent.

The company is reporting on March 2, 2012 for the quarter ended December 31, 2011 and is expected to report earnings per share of $0.10, according to consensus estimates. Earlier this month, New Gold reported that the company reached record annual production in 2011 of 387,155 ounces of gold with cash cost of $448 per ounce.

Whether you own the stock, or about to buy it, the bets against the company should motivate you as an investor to dig deeper and revisit your analysis.

Personally, I don't think the high short interest always represents negativity. In fact, I think that the record level of production for 2011 is encouraging.

It might be that some hedge funds feel New Gold will serve as a good hedge either because of its operations in Central America, or the value per proven and probable reserve ounces in the ground.

Nevertheless, high short interest should make you think twice before jumping into the trenches.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours