9 Best Short Squeeze Stocks 2024 to Watch
With the GameStop rally in 2021, the term ‘short squeeze’ rose to prominence within the world of finance. What exactly short squeezes are, as well as the pros and cons of speculating on them, is explained in this article. A list of short-squeeze stocks is also provided.
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Identifying Potential Short Squeeze Stocks
Regular investing involves an investor buying a share of a company at a given price. The hope is the company does good business, causing its profits to increase. This creates confidence in the business, leading more investors to buy the shares, and the share price to hopefully rise. The investor who bought in the beginning can now potentially sell for a profit. This style of investing is also known as ‘going long’.
The opposite of going long is to go short. Instead of profiting from a rise in share price, the investor attempts to profit from a decrease in share price. One method of doing this is investors borrowing shares from another party, and then selling them immediately. When the stock price falls, the investor can buy back the shares for a lower price and hand them back to the lender. After paying the lender a small borrowing fee, the investor can pocket the difference as their profit.
Another method to short-sell is to use CFDs (contracts for difference). These contracts track the underlying price of the market, offering a derivative of a market which allows you to speculate long and short.
What is a Short Squeeze Stock
A short squeeze is a special situation in which the short interest, i.e. the amount of money that is currently going short on a stock, is significantly high. If against expectations the share price of a stock starts rising rapidly, more and more short investors will start seeing red numbers and hurry to close their positions. Because short investors close their positions by buying back the stock, this only serves to add to the buying pressure. What ensues is called a short squeeze.
One of the most famous examples is the GameStop short squeeze, in which GameStop’s stock price rose from $17 to more than $500, and hedge funds reportedly lost more than $10 billion.
Factors that can indicate an incoming short squeeze are a high percentage of short interest (the percentage of the stock that is actively being shorted), a sudden increase in volume, as well as incoming news events and price trends.
Short Squeeze Stocks List to Watch
The following short squeeze stocks list should serve as an initial indication of which stocks have short squeeze potential. Investors should always perform their research on their own short-squeeze stock list before making investment decisions.
- Carvana Co. (CVNA) – Used Car Vendor
- Guess Inc (GES) – American Clothing Brand
- ImmunityBio Inc (IBRX.US) – Developing Cancer Immunotherapies
- C3.ai Inc (AI.US) – Sells Number Visualisation Software
- Arbor Realty Trust (ABR) – Real Estate Operation and Financing
- Allogene Therapeutics (ALLO.US) – Pharmaceutical Development Offshoot
- Anavex Life Sciences Group (AVXL) – Developing Pharmaceuticals for Neurodegenerative Diseases
- Big Lots (BIG) – Chain Discount Retailer
- Beyond Meat (BYND) – Plant-based Meat Alternatives
Carvana Co.
Carvana was founded by Ernest Garcia III in 2012 and operates novel car vending machines. The company managed to get onto the Fortune 500 list in 2021, as one of the youngest companies ever to do so. Carvana is a used car retailer, hailing from Arizona, offering same-day delivery in some states.
Carvana currently operates 39 used car vending machines, and multi-story glass towers from which customers can buy vehicles without the need for a salesman. Currently, Carvana has a market capitalisation of roughly $13.98 billion. At the time of writing, the short interest on Carvana Co. hovers around $29 million.
Guess Inc
Guess was founded in 1981 by the four Marciano brothers. After initially selling denim jeans, the company quickly started licensing its brand for other products like watches, and a fragrance line. In recent years, famous artists Camila Cabello and Jennifer Lopez, among others, have acted as faces of the brand.
Guess sells a wide range of fashion by its own design, including dresses, men’s clothing, denim, and luxury bags. The company also licences its brand to certain luxury accessories like watches and jewellery. Guess Inc. currently has a market capitalisation of $1.36 billion and a short interest of just over $7 million.
ImmunityBio Inc
ImmunityBio is an American biotechnology company founded in 2014 by South African businessman and Doctor Patrick Soon-Shiong. The company has spent the last decade performing great amounts of research, for which it has attracted funding from several institutional parties like Oberland Capital. ImmunityBio is currently focused on developing the next generation of immunotherapies for the treatment of various cancers.
The company is on the cutting edge of research, their lead antibody cytokine fusion protein having received Breakthrough Therapy status from the FDA. Currently, ImmunityBio Inc. has a market capitalisation of around $3.53 billion and a short interest of $53.25 million.
C3.ai Inc
C3.ai was founded by Thomas Siebel, an American billionaire businessman and former Oracle executive, in 2009. The company currently has a focus on developing enterprise AI, though formerly had ambitions within the Internet of Things and carbon footprint spaces.
C3.ai has a range of software to visualise business data regarding, for example, monitoring efforts or compliance with ESG standards. C3.ai currently has a market capitalisation of around $2.5 billion and a short interest of $31.53 million.
Arbor Realty Trust
Arbor Realty Trust is a Real Estate Investment Trust (REIT) founded over 3 decades ago in New York. They describe themselves as a financial partner that focuses on long-term growth, rather than just another real estate lender.
Arbor Realty Trust provides financing to retail and commercial entities in the real estate market. The company also owns and operates many real estate assets. The market capitalisation of Arbor Realty Trust currently is estimated at roughly $2.2 billion, and a short interest of around $68.95 million.
Allogene Therapeutics
Allogene Therapeutics is the result of a deal between the founders of Kite Pharma (an American biotech company) and Pfizer to develop CAR-T therapeutics. Allogene Therapeutics was created, and staffed, with three former Kite executives and several ex-Kite staff.
Allogene Therapeutics has dedicated itself to developing the next-generation CAR-T, which would not be tailor-made to a single individual, but could be used on many patients. The market capitalisation of Allogene Therapeutics currently encompasses $593 million, and a short interest of about $27.75 million.
Anavex Life Sciences Group
Anavex Life Sciences Group is a biopharmaceutical company currently trying to develop Central Nervous System (CNS) therapeutics, aimed at treating neurodegenerative diseases like Alzheimer’s. The company was founded in 2004 by Harvey Lalach and Athanasios Skarpelos and is headquartered in New York.
Anavex Life Sciences Group is currently still in the clinical stages of developing its pharmaceutical treatments. Anavex Life Sciences Group currently has a market capitalisation of around $334 million and a short interest of roughly $20 million.
Big Lots
Big Lots Inc. is an American retail chain with a focus on discount sales. The company was formed in 1967 in Ohio by Sol Shenk. In the next few decades, Big Lots opened dozens of stores spread over nearly all US states.
The company is a discount retailer that operates stores all over the United States. According to their website, they take pride in helping customers save money and introducing them to the ‘art of the deal.’ Big Lots currently has a market capitalisation of just over $100 million and a short interest of about $6.86 million.
Beyond Meat
Beyond Meat is a producer of plant-based meat alternatives, founded in 2009 by Ethan Brown. The company launched its first products 3 years later, and went public in 2019, becoming the first company selling meat analogues to do so.
The producer develops and sells plant-based meat alternatives. It has options that emulate chicken strips, hamburgers, sausages, and meatballs, among others. Its market capitalisation currently amounts to nearly $417 million. The short interest is around $21.78 million.
How to Invest in Short Squeeze Stocks
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Conclusion
Short-squeeze stocks can offer opportunities for investors who know how to engage with them well. It should be noted, though, that the short-term nature and unpredictability of short-squeeze stocks make them a high-risk endeavour.
Another downside of short squeeze stocks is that rallies like the GameStop short squeeze are in fact coordinated efforts to artificially inflate a company’s share price, i.e. market manipulation. In this instance, retail investors - as well as institutional investors - can suffer significant losses.
It's important to understand the risks involved. Consider testing your theories using a demo account. This enables you to invest in a virtual environment until you are ready to go live.
Continue Reading:
- Best Shares to Buy
- Best Monthly Dividend Stocks
- Best Stocks for Long-Term Growth
- 6 Short Term Investments
- How to Trade the US Stock Market
- The CFD Trading Guide
FAQs on Best Short Squeeze Stocks
What was the biggest short squeeze in history?
The biggest short squeeze stock in history is reported to be the Volkswagen stock short squeeze in 2008, in which Volkswagen’s stock price more than quadrupled in two days. Hedge funds reportedly lost over $30 billion in their short positions.
How high can a short squeeze go?
In theory, there is no real cap on how high a short squeeze can drive up the price of a stock. The short squeeze stock’s potential is dependent on factors like the amount of short interest, volume, and investor sentiment.
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