When analyzing stock market trends, investors regularly keep an eye on stocks with significant short interest, where the potential for a sudden surge keeps investors on their toes.
Monitoring stocks with a hefty percentage of their float shorted has become a common strategy. Why? Because these situations often pave the way for what’s known as a ‘short squeeze.’
This phenomenon happens when traders who’ve heavily bet against a stock suddenly scramble to cover their positions by snatching up shares. This not only jolts up the demand but also sends the stock price soaring, setting off a chain reaction as more short sellers rush to buy back in.
Picks for you
In this context, Finbold on January 11 pinpointed two heavily shorted stocks that have the potential to stage a noteworthy turnaround.
Fisker (NYSE: FSR)
With more than 47.2% of its share float being shorted by market bears, electric vehicle (EV) maker Fisker (NYSE: FSR) is among the leading contenders in the realm of stocks poised for a potential short squeeze.
FSR experienced a notable upswing on the last trading day of 2023 following the company’s impressive announcement of a substantial surge in electric vehicle deliveries. Notably, the automaker reported an impressive four-fold increase in deliveries during the final quarter, reaching a total of around 4,700 vehicles for the entire year.
The driving force behind this surge in sales was the heightened demand for Fisker’s Ocean SUV, priced at $69,000, with the initial deliveries to U.S. customers kicking off in June. Anticipating continued strong demand, Fisker intends to unveil a strategic plan in January to further boost sales and align production capacity with the robust interest in the Ocean SUV.
In 2023, Fisker successfully manufactured a total of 10,142 vehicles.
In spite of growing demand, FSR’s shares still concluded 2023 on a lower note, down more than 75% for the year. However, if conditions in the broader EV market begin to improve and Fisker continues to attract interest, Fisker’s stock may see heightened demand in the coming period.
With its extremely high short-interest ratio, a potential uptrend in the company’s shares could lead to a short squeeze.
Trupanion (NASDAQ: TRUP)
Headquartered in Seattle, Washington, Trupanion (NASDAQ: TRUP) specializes in providing pet insurance, focusing on coverage for cats and dogs.
Despite a more than 46% decline in equity value over the past year, Trupanion has become a target for market pessimists due to its challenging performance. According to Fintel, TRUP currently carries a notably high short interest of 36.2%.
Interestingly, in the latter months of 2023, TRUP has shown signs of recovery, witnessing a surge of over 45% since hitting a low of around $20.5 in October. This upward momentum suggests that contrarians might be working to challenge the prevailing short position.
Consequently, TRUP emerges as a noteworthy candidate for those watching for a potential short squeeze.
It’s crucial to acknowledge that concentrating on potential short-squeeze candidates entails significant risk. Recent data from S3 Partners in December indicated that short sellers have lost almost $178 billion on their bets in 2023.
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Disclaimer: The content on this site should not be considered investment advice. Investing is speculative. When investing, your capital is at risk.
