Plug Power, Inc. (NASDAQ:PLUG), Cinemark Holdings, Inc. (NYSE:CNK), and Allogene Therapeutics, Inc. (NASDAQ:ALLO) are some of the best short squeeze stocks to buy now based on their level of short interest as well as the conviction that world-class hedge funds have in their long-term prospects.
In the winner-takes-all world of buying and selling stocks, there is a constant tug-of-war taking place between a stock’s bulls (who believe the stock’s price will go up) and its bears (who believe the price will go down). Sentiment and momentum can play huge roles in a stock’s price movements and the two sides are constant battling to get that momentum on their side.
Given the role of sentiment and momentum in stock performance, short squeeze plays have become somewhat interrelated with meme stocks in that small groups of retail investors can help trigger bigger movements in a stock by collaborating to push it past certain resistance levels, after which the sky is the limit.
The meme short squeezes on GameStop Corp. (NYSE: GME) and AMC Entertainment Holdings, Inc. (NYSE: AMC), which have been two of the most successful short squeezes in stock market history, were largely facilitated through social media investment platforms like Reddit. Thus, looking for the next short squeeze stock on Reddit is a viable option, which is why we covered the 10 Most-Shorted Stocks Reddit’s WallStreetBets Is Paying Attention To.
When trying to find good short squeeze candidates, it’s not enough to simply identify the 15 Most Shorted Stocks Right Now on Wall Street, though that list certainly makes for a good starting point. One of the most important metrics to consider even above and beyond the short interest in a stock is the days it would take for the shorts to cover their positions.
When that figure is low, the best short squeeze stocks to buy today may not have much long-term potential, as shorts can quickly cover their positions and get out of a stock before it runs up too high. On the other hand, when the days to cover starts passing five or even ten days, shorts can be in a world of hurt if a stock starts to rally, as there typically isn’t enough trading volume in the stock for all of them to cover their positions in a timely manner.
When stocks rally, the volume of shares trading hands tends to increase however, which does provide a window for shorts to get out, which is why the top short squeeze stocks to buy right now should all have a minimum of five or more days to cover. In that case, even should the daily volume on a stock double or triple, it could still take days for shorts to cover their positions.
Given that, the following short squeeze stocks list features only stocks that have greater than 20% short interest, as well as a minimum of five days for shorts to cover their positions, which presents legitimate opportunities to catch shorts in a squeeze. These stocks are also fairly popular among hedge funds given their relatively small sizes, with at least 20 smart money managers being long each of them as of March 31, which speaks to their long-term growth potential.
12 Best Short Squeeze Stocks to Buy Now
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Our Methodology
The following list of the best short squeeze stocks to buy now, which feature stocks with a minimum 20% short interest and five days to cover, are ranked based on hedge fund sentiment. We follow a select group of hedge funds because Insider Monkey’s research has uncovered that their consensus stock picks can deliver outstanding returns.
All hedge fund data is based on the exclusive group of 900+ funds tracked by Insider Monkey that filed 13Fs for the Q1 2023 reporting period.
Allogene Therapeutics, Inc. (NASDAQ:ALLO), Plug Power, Inc. (NASDAQ:PLUG), and Cinemark Holdings, Inc. (NYSE:CNK) are three stocks with sky high short interest that hedge funds like. Another is The Children’s Place, Inc. (NASDAQ:PLCE), 30% of the shares of which are currently being sold short.
Hedge fund ownership of The Children’s Place, Inc. (NASDAQ:PLCE) has been volatile for much of the past two years, falling by 38% in the second quarter of last year before jumping back up by 38% the following quarter. Dmitry Balyasny’s Balyasny Asset Management opened a new stake in PLCE during the first quarter, while Steve Cohen’s Point72 Asset Management raised his modest stake by 595% to 126,452 shares.
The Children’s Place, Inc. (NASDAQ:PLCE) was hit with bad news late last week when it was announced that the retailer of children’s clothing would be losing its place in the S&P Small Cap 600, which is likely to out further selling pressure on the stock. UBS lowered its price target on PLCE to $20 from $40 near the end of May, noting that should the recession drag on, the company’s results could be hurt more than anticipated.
Balyasny’s fund also owns the largest stake in SL Green Realty Corp. (NYSE:SLG) as of March 31, consisting of 1.14 million shares. Overall hedge fund sentiment towards the REIT remained flat during Q1 after rising slightly in 2022.
SL Green Realty Corp. (NYSE:SLG) primarily operates in New York City, where it focuses on the ownership and leasing of space in office buildings and shopping centers. In the first quarter, the company’s revenue grew to $224 million from $188 million a year earlier, though FFO declined to $1.53 from $1.65.
The solid quarterly performance was enough for BMO Capital analyst John Kim to raise his price target on SL Green Realty Corp. (NYSE:SLG) to $32 from $30, citing the company’s increased leasing activity. The analyst believes asset sales will be necessary to help the company refinance and pay down some of its debt, though none were announced during the latest quarter. He has an ‘Outperform’ rating on SLG shares.
Hedge fund ownership of Cutera, Inc. (NASDAQ:CUTR) doubled during 2020-2022, hitting a new high at the end of last year. However, several funds did sell off their CUTR positions in the first quarter of this year, contributing to a 25% decline in smart money ownership. Steve Cohen’s Point72 Asset Management and Richard Driehaus’ Driehaus Capital were among the funds to unload their Cutera holdings during the quarter.
Like The Children’s Place, Cutera, Inc. (NASDAQ:CUTR) has also lost its spot in the S&P Small Cap 600 recently, being replaced by DISH Network Corporation (NASDAQ:DISH). The medical aesthetics company has also been embroiled in a dispute with J. Daniel Plants’ Voce Capital, which has 43% 13F exposure to the stock as of March 31.
While the fund clearly believes in Cutera, Inc. (NASDAQ:CUTR)’s value proposition and has a seat on the company’s board (in fact, Plants is the board’s Executive Chairman), it’s also been dissatisfied with the board’s composition and actions. Ahead of a Special Meeting scheduled for June 9, members of the board struck a deal with two of the company’s largest shareholders which would give them control of the board in exchange for those Directors retaining their positions. Plants described their actions as self-interested and claimed they have repeatedly shirked their fiduciary duties, while the board claims Plants is the one unwilling to give up his seat and that he’s costing the company money.
Hedge funds were selling out of Vertex Energy, Inc. (NASDAQ:VTNR), one of the 5 Most Shorted Oil Stocks in the world, throughout much of 2022, but that changed earlier this year. After closing the year down 63% from its 2022 high, several hedge funds liked the new entry point on VTNR shares, including the vaunted quant fund Two Sigma Advisors, managed by John Overdeck and David Siegel, which bought 25,900 shares.
Vertex Energy, Inc. (NASDAQ:VTNR)’s Mobile, Alabama refinery has been operating at expected levels recently, with throughput volumes of between 69,000 and 72,000 barrels per day and operating expenses of between $3.85 and $4.00 per barrel. The company also pushed forward the timeline for its planned renewable diesel project from Q2 to Q1, which it believes will boost efficiencies.
TD Cowen has a ‘Market Perform’ rating and $8 price target on Vertex Energy, Inc. (NASDAQ:VTNR), noting that its acquisition of the Mobile refinery from Shell last year has helped transform the company’s business. The firm expects Vertex’s earnings to improve in 2024 and to make further improvements in 2025.
At 16.7 days to cover their positions based on Verve Therapeutics, Inc. (NASDAQ:VERV)’s daily average trading volume, short sellers could be in big trouble if the gene editing biotech’s stock starts to rally. Among the best short squeeze stocks to buy now, Verve has also had some of the steadiest hedge fund ownership since hitting the market. It’s also got some big money managers backing it, including Cathie Wood’s ARK Investment Management.
Verve Therapeutics, Inc. (NASDAQ:VERV) is one of the earliest-stage CRISPR stocks on the market, which has attracted plenty of bears to bet against it given that some of the shine has come off CRISPR stocks in recent quarters due to some high-profile CRISPR trials producing underwhelming results.
Verve Therapeutics, Inc. (NASDAQ:VERV), which is targeting cardiovascular diseases through the gene-editing technology in combination with a non-viral delivery modality, could conservatively generate peak sales of $5 billion from its two lead programs according to Canaccord analyst Whitney Ijem, who has a ‘Buy’ rating and $29 price target on the stock.
Stem, Inc. (NYSE:STEM) shares are down by 70% since mid-September, when they were trading hands at over $16 each. For the most part, hedge funds are sticking with the company, which is not in fact a biotech as its name might suggest, but rather a smart energy optimization and storage company. In fact, the firm’s top shareholder, Ken Griffin’s Citadel Investment Group, raised the size of its STEM position 10-fold during Q1 to 3.79 million shares.
Stem, Inc. (NYSE:STEM)’s growth has been accelerating in recent quarters and the company’s bookings have been tremendous, more than doubling year-over-year in the both the fourth quarter of last year and the first quarter of this year. Q1 revenue of $67.4 million easily topped estimates and the company’s margins were in line with estimates. Stem, Inc. (NYSE:STEM) also projects to be EBITDA profitable by the second half of this year.
TPI Composites, Inc. (NASDAQ:TPIC) is another one of the Stocks Targeted By Short Sellers Recently. Given they’d need eight days to cover their short positions, they’re in a vulnerable position should a short squeeze opportunity present itself to the stock’s bulls. Among those bulls are Steve Cohen’s Point72 Asset Management and Ken Griffin’s Citadel Investment Group, both of which were buying more TPIC shares in Q1.
TPI Composites, Inc. (NASDAQ:TPIC)’s core windmill blades business has been strong, growing revenue by more than 20% in Q1, which contributed to an overall revenue beat for the company. However, it lost $0.88 per share during the quarter and was forced to take on more debt.
TPI Composites, Inc. (NASDAQ:TPIC)’s secondary business of building composite bodies for electric busses has been a disappointment and largely to blame for the company’s overall results, as Q1 sales slipped by 20%. The two businesses have also failed to produce cost efficiencies as they’ve scaled up, severely impacting their profitability.
Cinemark Holdings, Inc. (NYSE:CNK), Allogene Therapeutics, Inc. (NASDAQ:ALLO), and Plug Power, Inc. (NASDAQ:PLUG) are three of hedge funds’ favorite stocks that are being targeted by short sellers, which could present some great short squeeze opportunities in the future. Check out the details by clicking the link below.
