Some stocks with high short interest truly deserve bullish investors’ attention
Bulls, bears but not pigs. The advice was certainly useful in a circus-like spectacle involving some of Wall Street’s most heavily shorted stocks. But not all shorted stocks are the same. Based on today’s evidence both off and on the price chart, three of these battleground plays look well-positioned for bulls to prosper.
First, let’s address the main company that’ll come to mind these days whenever a discussion of heavily shorted stocks comes into play.
That’s right — we’re talking about “Gamestonk!!” The now infamous and incorrectly hyped recognition of GameStop (NYSE:GME) by Tesla’s (NASDAQ:TSLA) front man Elon Musk was part of the market’s fascination with the over-the-top rise and spectacular fall of the brick-and-mortar video game retailer. And rightly so.
The story of Main Street’s proverbial David using the Reddit forum r/wallstreetbets to wage a long stock campaign against wealthy and sophisticated hedge funds shorting GME had all the elements great theater. And as shares soared from $43 to nearly $500 and back down to about $50 in 10 trading days, the show was in fact a spectacle. It’s also true the actual price of admission for a ride up and down in GME stock likely proved catastrophic for many bulls and bears alike. Enough said.
But not all heavily shorted stocks are flash in the pan events or deserve to have bears betting against them. Amazon (NASDAQ:AMZN). Netflix (NASDAQ:NFLX). Those two phenomenally successful companies whose shares have made fortunes for their investors were at one time highly contested. They were also heavily shorted stocks with many investors betting against their businesses’ ability to survive. Of course, they were wrong. Dead wrong.
Over the last couple of years, TSLA enjoyed the dubious honor of being the market’s most heavily shorted stock by dollar value. And it happened as shares soared and Tesla’s valuation ballooned from a fraction of competitors like Ford Motors (NYSE:F) and General Motors (NYSE:GM) to dwarfing those auto manufacturers’ valuations multiple times over. Doink!
Given the history of bullish outcomes for some heavily shorted stocks, let’s look at three that the so-called “smart money” might be wrong about: