In this piece, we will take a look at the 13 best short squeeze stocks to buy now. If you want to skip our primer on short squeezing, and some of the greatest short squeezes in history, then you can take a look at the 5 Best Short Squeeze Stocks To Buy Now.
Short selling is one of the most controversial aspects of the stock market. After all, investing is typically thought to be a 'value creating' endeavor, where both retail and professional players engage in trading to pick the right stock and make millions if not billions of dollars.
On the flip side, short selling comes with the aim of profiting from the drop in share price. Those who argue in its favor belief that it allows market players to exploit weaknesses and be rewarded for their actions. A rather controversial practice short sellers benefit when the shares of a firm, such as the well known U.S. green vehicle designer Nikola Corporation (NASDAQ:NKLA) or the Indian business conglomerate Adani Enterprises Limited (NSE:ADANIENT.NS), drop in value. Yet, this same drop harms existing investors as well, an occurrence that ensures that short selling will remain controversial as long as the stock markets continue to exist.
While the profits of short selling stocks are lucrative, at the same time, betting against the wrong names can be disastrous and wipe out entire portfolios. While short sellers who target Nikola and Adani ended up being richer, the stock market is also filled with examples of stocks that ended up being short squeeze stocks. One source of controversy surrounding short selling surrounds the fact that bets against a stock are publicly visible. So, you can see what the short interest in a stock that trades on the NASDAQ exchange is simply by visiting the exchange's website. As a result, at least when it comes to the retail front, if a stock has a substantial amount of short interest, then investors looking to pick it as a long term, value creating investment will naturally wonder if there's something under the hood that's amiss.
Similarly, and particularly as events after the coronavirus pandemic have shown, short squeeze stocks can also change the fortunes of those lucky or wise enough to pick them. The pandemic, which saw populations all over the world sent indoors, also led to the two biggest short squeezes in history, the meme stocks GameStop Corp. (NYSE: GME) and AMC Entertainment Holdings, Inc. (NYSE: AMC). GameStop's short squeeze dented Wall Street in ways previously unimaginable, and it even led to Senate hearings of Reddit forum members.
However, when it comes to the all time legendary short squeeze stocks, while GameStop is well known, there are tons of others that have made even larger impacts. For instance, even as of 2021, when Insider Monkey took a look at 10 Biggest Short Squeezes of All Time, the biggest short squeeze after 13 years was Volkswagen AG (OTC: VWAGY). The Volkswagen short squeeze cost short sellers more than three times in losses than GameStop, fueled by the fact that as Volkwagen's shares soared, it became the most valuable company in the world with a share price of €999.
The saga of Volkswagen's legendary short squeeze is more complex than the tale written by the GameStop traders. At its heart was the hedge fund industry, which sought to exploit the price differential between the firm's preferred and ordinary stock in the aftermath of legal developments in Germany that enabled a Volkswagen takeover through holding a 75% interest in the firm. Preferred stock, for those out of the loop, is a dividend paying security that does not offer its holder a stake in a publicly traded company's governance.
When the difference in the prices between the two share classes started to grow, investors sold 12% of the ordinary shares short. But, they were caught with their pants down after Porsche revealed that it had quietly bought nearly 75% of Volkswagen's stock. This meant that as Porsche and a German State owned nearly 94% of the shares, half of those who had shorted the stock would be left without the ability to close their bets. Consequently, the mad scupper to buy Volkswagen shares ensured that Volkswagen became the world's most valuable company. To understand why short sellers have to buy back a stock, you can check out 15 Stocks with Lowest Short Interest. And for a billionaire's trysts with short selling, check out Stanley Druckenmiller 13F Portfolio: Top 15 Stocks.
So, are there any short squeeze stocks that might also surprise investors? While nobody can pick such stocks and the ones today could very well drop instead, we did try and the top names were Celsius Holdings, Inc. (NASDAQ:CELH), Iovance Biotherapeutics, Inc. (NASDAQ:IOVA), and Carvana Co. (NYSE:CVNA).
13 Best Short Squeeze Stocks To Buy Now
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Our Methodology
To make our list of the best short squeeze stocks, we first made a list of stocks with 20% of their float sold short, price 10% above 200 day simple moving average, shortable options, and a relative volume greater than 25%. They were then ranked by the number of hedge fund investors that had invested in them as of Q4 2023 end.
For these short squeeze stocks, we used hedge fund sentiment. Hedge funds’ top 10 consensus stock picks outperformed the S&P 500 Index by more than 140 percentage points over the last 10 years (see the details here). That’s why we pay very close attention to this often-ignored indicator.
Tango Therapeutics, Inc. (NASDAQ:TNGX) completes the hat trick of biotechnology companies on our list of the best potential short squeeze stocks. While it has been relatively quiet on the news front for the firm as of late, it has been doing well financially and has beaten analyst EPS estimates in all four of its latest quarters.
As of Q4 2023 end, 19 out of the 933 funds tracked by Insider Monkey had bought a stake in Tango Therapeutics, Inc. (NASDAQ:TNGX).
Archer Aviation Inc. (NYSE:ACHR) is the first non biotechnology company that qualifies as a potential short squeeze stock. It's a high risk, high reward firm that is seeking to disrupt urban transportation by offering electric vertical take off and lift off (EVTOL) aircraft. February 2024 was an important month for the firm as it revealed that it now has three piloted aircraft under construction.
After digging through 933 hedge fund portfolios for their December quarter of 2023 shareholdings, Insider Monkey found that 22 had bought Archer Aviation Inc. (NYSE:ACHR)'s shares.
AnaptysBio, Inc. (NASDAQ:ANAB) is a healthcare company developing treatments for psoriasis, inflammatory diseases, and other ailments. The shares are rated Buy on average, and the average analyst share price target is $27.
After digging through 933 hedge fund holdings for their fourth quarter of 2023 investments, Insider Monkey discovered that 24 had invested in the firm. AnaptysBio, Inc. (NASDAQ:ANAB)'s biggest hedge fund shareholder is Ken Fisher's Fisher Asset Management due to its $1.5 million stake.
SL Green Realty Corp. (NYSE:SLG) is a real estate investment trust headquartered in New York. The fact that it's highly shorted is unsurprising since it operates in the office industry - which has been under strain all over the world due to high rates and low occupancy. To wit, SL Green Realty Corp. (NYSE:SLG) has also missed analyst EPS estimates in all four of its latest quarters.
During last year's fourth quarter, 25 out of the 933 hedge funds surveyed by Insider Monkey were SL Green Realty Corp. (NYSE:SLG)'s shareholders. Anand Parekh's Alyeska Investment Group was the largest investor among these since it owned 1.1 million shares that were worth $44.5 million.
Collegium Pharmaceutical, Inc. (NASDAQ:COLL) is a small healthcare and drug maker headquartered in Stoughton, Massachusetts. A high percentage of its float is sold short, which is understandable from the fact that the firm has missed analyst EPS estimates in two out of its four latest quarters, but the EPS has started to take on a growth trend as of late.
By the end of last year's fourth quarter, 26 out of the 933 hedge funds covered by Insider Monkey's research had held a stake in Collegium Pharmaceutical, Inc. (NASDAQ:COLL). David Rosen's Rubric Capital Management was the firm's biggest hedge fund investor due to its $84.4 million stake.
Along with Iovance Biotherapeutics, Inc. (NASDAQ:IOVA), Celsius Holdings, Inc. (NASDAQ:CELH), and Carvana Co. (NYSE:CVNA), Recursion Pharmaceuticals, Inc. (NASDAQ:RXRX) is a stock with high short interest that hedge funds are piling into.
CRISPR Therapeutics AG (NASDAQ:CRSP) is one of the leading companies in the world when it comes to genetic engineering. Its continuing to make waves these days, and February 2024 saw the firm's treatment for Sickle Cell Disease secure conditional approval from the European Union.
26 out of the 933 hedge funds part of Insider Monkey's Q4 2023 database had bought CRISPR Therapeutics AG (NASDAQ:CRSP)'s shares. Catherine D. Wood's ARK Investment Management was the biggest investor through its $325 million investment.
Celsius Holdings, Inc. (NASDAQ:CELH), CRISPR Therapeutics AG (NASDAQ:CRSP), Iovance Biotherapeutics, Inc. (NASDAQ:IOVA), and Carvana Co. (NYSE:CVNA) are some top short squeeze stocks according to hedge funds.
Trupanion, Inc. (NASDAQ:TRUP) is an annual insurance company headquartered in Seattle, Washington. It's one of the worst performing best short squeeze stocks on our list since the shares are down by 25% year to date.
During last year's fourth quarter, 27 out of the 933 hedge funds surveyed by Insider Monkey had invested in the firm. Brian Ashford-Russell and Tim Woolley's Polar Capital was the biggest Trupanion, Inc. (NASDAQ:TRUP) shareholder as it owned $38.1 million worth of shares.
Nuvalent, Inc. (NASDAQ:NUVL) is a biotechnology company that is developing treatments for cancer. Despite the fact that a fifth of its shares are sold short, the stock is rated Strong Buy on average and has an average share price target of $82 - lower than the current price.
During December 2023, 19 out of the 933 hedge funds part of Insider Monkey's database were the firm's investors. Nuvalent, Inc. (NASDAQ:NUVL)'s largest investor among these is James E. Flynn's Deerfield Management due to its $918 million investment.
