In this article, we discuss the 10 most shorted stocks to watch in September.
In the past two years, short squeezes have become a hot and a controversial topic on Wall Street. Reddit became a leading platform where retail investors started discussions and came together to initiate a long position in some of the stocks that were heavily shorted by hedge funds and institutional investors. These campaigns began to cause short squeezes as short sellers were forced to buy shares and cover their positions. Many observers believe that short sellers make the market efficient as they are the first to call out the problems of a company by taking a short position on its shares. According to Adam Reed, a finance professor at the University of North Carolina, stocks that have a high short-interest ratio tend to underperform the broader market. Mr. Reed is considered an expert on the importance of short-sale data.
In the current macroeconomic circumstances, the broader market lacks any catalysts to generate strong returns. One of the few opportunities for investors to earn profits is through buying the most shorted stocks in the expectation that a short squeeze would cause the stock price to rise significantly. The majority of the companies in our list of the ten most shorted stocks in September belong to the biotech and technology segment, as these companies are still trading at a significant valuation that some investors are unable to wrap their heads around. Furthermore, the short sellers believe that the increase in benchmark interest rate by the Federal Reserve will only make matters worse for these companies. This is because the present value of future cash flows declines when the benchmark interest rates increase. Some of the most shorted stocks in September include Beyond Meat, Inc. (NASDAQ:BYND), MicroStrategy Incorporated (NASDAQ:MSTR), and Sirius XM Holdings Inc. (NASDAQ:SIRI).
Our Methodology
We have listed stocks that have at least 30% of their float sold short as of August 30. The business fundamentals and the overall market sentiment on the stocks have been discussed to understand the rationale behind the high short interest ratio in these companies. The stocks have been ranked according to the level of hedge fund ownership as of Q2 2022, according to Insider Monkey’s database of 895 elite hedge funds.
10 Most Shorted Stocks in September
10. Cassava Sciences, Inc. (NASDAQ:SAVA)
Number of Hedge Fund Holders: 2
Float Shorted: 33.25%
Cassava Sciences, Inc. (NASDAQ:SAVA) is an Austin, Texas-based clinical-stage biotech company that changed its name from Pain Therapeutics, Inc. in 2019. The company is focused on neuroscience with an emphasis on Alzheimer’s disease. In the US alone, there are five million patients suffering from this ailment.
Cassava Sciences, Inc. (NASDAQ:SAVA) stock is undergoing a sort of short squeeze as it is hovering around a five-month high with no substantial development backing this surge. In July, the stock price of Cassava Sciences, Inc. (NASDAQ:SAVA) plummeted after a report by Reuters claimed that the US Department of Justice had initiated a criminal investigation regarding the experimental Alzheimer’s therapy offered by the company. However, Cassava Sciences, Inc. (NASDAQ:SAVA) promptly declined these claims.
The recent rally in Cassava Sciences, Inc. (NASDAQ:SAVA) stock price can be partially attributed to two purchases by Directors Richard Barry and Sanford Robertson. Mr. Robertson is a co-founder at technology buyout Francisco Partners, and he acquired 100,000 shares of Cassava Sciences, Inc. (NASDAQ:SAVA) in August for over $2 million. The value of his stake has nearly doubled following the recent surge in stock price.
9. Groupon, Inc. (NASDAQ:GRPN)
Number of Hedge Fund Holders: 11
Float Shorted: 33.48%
Groupon, Inc. (NASDAQ:GRPN) is a Chicago, Illinois-based e-commerce entity that was founded in 2008 and is known for employing a group discount model. Groupon, Inc. (NASDAQ:GRPN) is at the ninth position on our list of the ten most shorted stocks in September.
Groupon, Inc. (NASDAQ:GRPN) has become one of the most shorted stocks in September because of its declining revenue, as it fell by 42.4% YoY to $153.2 million at the end of Q2 2022. Furthermore, according to TechCrunch, the company has laid off over 500 employees. This is a significant number as the most recent annual 10-k filing revealed that Groupon, Inc. (NASDAQ:GRPN) had a headcount of 3,675 employees at the end of 2021.
However, the company is undergoing a restructuring that is expected to generate positive cash flows by the end of this year. Following all these developments, Trevor Young at Barclays slashed the price target on Groupon, Inc. (NASDAQ:GRPN) from $12 to $10 and maintained an Underweight rating on the stock. The analyst highlighted the withdrawal of 2022 guidance and the $200 million multi-year restructuring plan as an overhang on Groupon, Inc. (NASDAQ:GRPN) stock.
Of the 895 hedge funds tracked by Insider Monkey at the end of Q2 2022, Groupon, Inc. (NASDAQ:GRPN) was held by 11 hedge funds.
8. PMV Pharmaceuticals, Inc. (NASDAQ:PMVP)
Number of Hedge Fund Holders: 12
Float Shorted: 35.71%
PMV Pharmaceuticals, Inc. (NASDAQ:PMVP) is a Cranbury, New Jersey-based biotech company that has come up with a precision oncology platform. The platform is leveraging the power of the p53 tumor suppressor.
The company has joined forces with leading pharmaceutical company Merck & Co., Inc. (NYSE:MRK) to study the efficacy of its lead candidate PC14586 with anti-PD-1 therapy Keytruda developed by Merck in treating advanced solid tumors. The inclusion of PMV Pharmaceuticals, Inc. (NASDAQ:PMVP) will create a combination arm in research involving patients suffering from advanced solid tumors.
One of the probable reasons for investors shorting PMV Pharmaceuticals, Inc. (NASDAQ:PMVP) stock could be the company’s heavy reliance on the successful outcome of its lead candidate, PC14586. It is the only substantial candidate in the pipeline that is presently in the Phase-I of the study. All the remaining candidates are at the early stage of discovery.
OrbiMed Advisors was the leading hedge fund investor in PMV Pharmaceuticals, Inc. (NASDAQ:PMVP) during the second quarter of 2022. The hedge fund held over 6.5 million shares in the company, worth nearly $93.5 million as of Q2 2022.
7. Big Lots, Inc. (NYSE:BIG)
Number of Hedge Fund Holders: 14
Float Shorted: 63.09%
Big Lots, Inc. (NYSE:BIG) is a Columbus, Ohio-based retail company that was founded in 1967 and has a presence of over 1,400 stores across 47 states in the US. The company is primarily involved in décor, food, and furniture.
As of August 30, Big Lots, Inc. (NYSE:BIG) had over 60% of its float sold short, making it one of the most shorted stocks to watch in September. In a research note issued to investors on September 16, Matthew Boss at JPMorgan increased the price target on Big Lots, Inc. (NYSE:BIG) from $8 to $9 but maintained an Underweight rating on the stock. The expected December 2023 target price reflects a potential downside of over 51% from the closing price as of September 21. The significant downside potential expected by the research firm could be a major reason for such heavy short-selling of Big Lots, Inc. (NYSE:BIG) stock. However, the analyst appreciated the recovery in the retail sector during August 2022 as opposed to the bottom reached in June 2022.
Mill Road Capital Management held over 1 million shares in Big Lots, Inc. (NYSE:BIG) with a value of over $30.6 million as of Q2 2022.
6. Heron Therapeutics, Inc. (NASDAQ:HRTX)
Number of Hedge Fund Holders: 17
Float Shorted: 34.86%
Heron Therapeutics, Inc. (NASDAQ:HRTX) is a San Diego, California-based biotech company that is involved in developing chemotherapy-induced and postoperative nausea and vomiting prevention therapeutics along with pain management treatments.
Heron Therapeutics, Inc. (NASDAQ:HRTX) has 34.86% of its float sold short as of August 30, warranting its inclusion in our list of the ten most shorted stocks in September. Heron Therapeutics, Inc. (NASDAQ:HRTX) slashed its headcount by 34% in June 2022. This was part of a restructuring plan that will result in an annual saving of $43 million. To improve its liquidity position, which stood at $83 million at the end of Q2 2022, Heron Therapeutics, Inc. (NASDAQ:HRTX) raised over $75 million through secondary offerings in August. Meanwhile, Heron Therapeutics, Inc. (NASDAQ:HRTX) burned through $28.2 million of its cash during Q2 2022. The company expects the cash burn to increase further due to the impact of the restructuring efforts. The company also needs to increase its revenue significantly to achieve cash flow breakeven.
Although Heron Therapeutics, Inc. (NASDAQ:HRTX) received approval for Aponvie from the US Food and Drug Administration, the preventer of postoperative nausea and vomiting medicine is still competing with numerous generic medicines in the same segment.
Baker Bros. Advisors was the leading hedge fund investor in Heron Therapeutics, Inc. (NASDAQ:HRTX) during Q2 2022.
In addition to Heron Therapeutics, Inc. (NASDAQ:HRTX), some of the most shorted stocks in September include Beyond Meat, Inc. (NASDAQ:BYND), MicroStrategy Incorporated (NASDAQ:MSTR), and Sirius XM Holdings Inc. (NASDAQ:SIRI).
5. MicroStrategy Incorporated (NASDAQ:MSTR)
Number of Hedge Fund Holders: 18
Float Shorted: 39.68%
MicroStrategy Incorporated (NASDAQ:MSTR) is a Tysons, Virginia-based provider of business intelligence and analytics, cloud-based services, and mobile software. The company has the distinction of being the biggest corporate holder of Bitcoin, with ownership of over 130,000 Bitcoins.
At the current market price of around $30,000 per Bitcoin, the company’s stake is valued at over $2.47 billion as of September 2022. It should be noted that MicroStrategy Incorporated (NASDAQ:MSTR) is deep in the red in terms of its Bitcoin holdings, as it invested nearly $4 billion to buy 130,000 Bitcoins with an average purchase price of over $30,300 per Bitcoin.
The share price of MicroStrategy Incorporated (NASDAQ:MSTR) has also come under pressure after the Attorney General’s Office for the District of Columbia filed a civil complaint against the company and CEO Michael J. Saylor. The State AG claims that Mr. Saylor has been evading income taxes despite residing in the District of Columbia for the past decade.
4. EVgo, Inc. (NASDAQ:EVGO)
Number of Hedge Fund Holders: 18
Float Shorted: 31.31%
EVgo, Inc. (NASDAQ:EVGO) is a Los Angeles, California-based provider of public electric charging stations and provides its services through more than 850 fast charging stations spread across 30 states.
The US government is expected to approve a budget of $900 million for the construction of electric vehicle (EV) charging stations across 35 US states. This funding is part of the $1 trillion infrastructure bill approved in November 2021. The Biden Administration wants 50% of all new vehicles to be either electric or plug-in hybrid electric models. To facilitate this, the government intends to provide the infrastructure of over 500,000 EV charging stations across the US. The government has also provided $3 billion to US Postal Services to upgrade its delivery vehicle fleet to electric.
Despite all these developments, the Street does not expect EVgo, Inc. (NASDAQ:EVGO) to become profitable before 2025. In Q2 2022, EVgo, Inc. (NASDAQ:EVGO) posted an adjusted EBITDA of -$19.8 million.
3. Revolve Group, Inc. (NYSE:RVLV)
Number of Hedge Fund Holders: 20
Float Shorted: 35.30%
Revolve Group, Inc. (NYSE:RVLV) is a Cerritos, California-based fashion retailer targeting Generation Z and Millennial customers through various in-house brands.
Trevor Young at Barclays resumed coverage on Revolve Group, Inc. (NYSE:RVLV) stock on August 15 and downgraded it from an Equal Weight to an Underweight rating with a revised target price of $20, down from $30. The analyst highlighted that Revolve Group, Inc. (NYSE:RVLV) is strong in terms of execution and is growing at a quicker pace than its competitors due to its small base. However, Revolve Group, Inc. (NYSE:RVLV) stock is trading at an unjustifiable 100% premium against its competitors based on the expected revenues and earnings for 2023. In addition, there is a slowdown in revenue growth, and gross margins could come under pressure as full-price sales revert to normal levels.
Polen Capital discussed its outlook on Revolve Group, Inc. (NYSE:RVLV) in its Q1 2022 investor letter. Here’s what the firm said:
“Online fashion retailer Revolve had another favorable quarter, and our investment in this company has continued to compound at a high level. We were impressed with the company’s recent results, especially the combination of customer growth, the growing number of orders per customer, and improving average order values. We believe the company still has considerable room for growth as it benefits from the bourgeoning trend of fashion going online, while its investments in adjacent categories, like beauty, are increasing the market opportunity its addressing.”
As of Q2 2022, 20 hedge funds reported owning a stake in Revolve Group, Inc. (NYSE:RVLV).
2. Beyond Meat, Inc. (NASDAQ:BYND)
Number of Hedge Fund Holders: 20
Floated Shorted: 36.61%
Beyond Meat, Inc. (NASDAQ:BYND) is a California-based manufacturer of plant-based meat substitute products.
In a research note issued on September 21, Michael Lavery at Piper Sandler slashed the price target on Beyond Meat, Inc. (NASDAQ:BYND) from $9 to $8 and reiterated an Underweight rating on the stock. The stock price is already hovering around an all-time low, but the target price assigned by the analyst sees a further downside of over 50% from the closing price as of September 21. The analyst highlighted an acceleration in decline in retail sales for Beyond Meat, Inc.’s (NASDAQ:BYND) products. Although the company could see strong jerky sales for the remainder of 2022 due to heavy discounting and high inventory, it could also end up squeezing the margins due to operational inefficiencies.
Here’s what Horos Asset Management said about Beyond Meat, Inc. (NASDAQ:BYND) in its Q1 2022 investor letter:
“What about the other asset class that has attracted the most attention from the investment community in recent times? Beyond Meat is the other company whose valuations we did not understand and whose share price has also declined drastically in the last year and a half.”
1. Sirius XM Holdings Inc. (NASDAQ:SIRI)
Number of Hedge Fund Holders: 21
Float Shorted: 31.30%
Sirius XM Holdings Inc. (NASDAQ:SIRI) is a New York-based online and satellite radio broadcasting company with over 150 million subscribers.
Experts believe that Sirius XM Holdings Inc. (NASDAQ:SIRI) could be headed towards a significant downturn next year as they anticipate a decline in net subscriber additions for the rest of 2022. Following the ease of the pandemic, there is now a shift towards other activities as opposed to listening to the radio. People are going out to enjoy summer vacations without lockdowns and restrictions. In a research note issued to investors on August 1, Jeffrey Wlodarczak downgraded Sirius XM Holdings Inc. (NASDAQ:SIRI) from a Buy to a Hold rating and lowered the price target from $7.55 to $7.10.
Two Sigma Advisors raised its stake in Sirius XM Holdings Inc. (NASDAQ:SIRI) by 42% during Q2 2022.
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Disclose. None. 10 Most Shorted Stocks in September is originally published on Insider Monkey.
