In this article, we discuss the 10 most shorted stocks to watch in June.
Reports indicate that short-sellers are increasing their bets on the SPDR S&P 500 Exchange-Traded Fund Trust at the quickest pace in a year. Other investors are picking up options contracts at an all-time high, which would pay out if the recent bond and stock market decline worsened.
The mounting geopolitical tensions come at a time when financial markets have already been pressured by rising inflation and uncertainty over the pace at which the Federal Reserve will raise interest rates. Meanwhile, earnings growth is projected to slow down from its blistering speed in 2021, when profits were compared to their depressed levels during the initial stages of Covid-19. The S&P 500 Index is down 21% YTD, while the tech-heavy Nasdaq Composite is down 30% YTD as of June 14. Moreover, the benchmark borrowing costs in the bond market surpassed 2% for the first time since mid-2019, earlier in February. According to estimates from technology and data analytics firm S3 Partners, short sellers increased their positions against the SPDR S&P 500 ETF Trust by $8.6 billion in February. This sum would be the highest since early March 2021.
Talking to the Wall Street Journal earlier this year, ACM Funds’ chief investment officer, Jordan Kahn, said that his fund has been reducing stock positions through one of its approaches while increasing short-bets against exchange-traded funds that follow the overall market trend. Mr. Kahn said he became concerned at the end of 2021 when he noticed that individual equities were falling in value, but major indices remained stable. He looks at the situation as a “red flag” and stated that “we think that the most likely scenario is that those big stocks that haven’t had as big a correction yet will probably at some point play catch-up to the downside.”
As per S3 Partners, 79% of capital invested in short positions made a profit in January. Losses in software and services companies resulted in the largest gain across industries, with a 19.2% return for shorts. Investors are hedging against a number of large tech firms that have driven the market upward in recent years, anticipating a reverse in 2022. According to S3 Partners, investors added $1.3 billion to their short positions on Tesla, Inc. (NASDAQ:TSLA) and over $844 million to their bets against NVIDIA Corporation (NASDAQ:NVDA) earlier this year. MicroStrategy Incorporated (NASDAQ:MSTR) is also amongst the most shorted stocks to watch in June.
By MicroStrategy – MicroStrategy, CC BY 4.0, https://commons.wikimedia.org/w/index.php?curid=64257908
Our Methodology
The stocks have been picked according to the percentage float shorted as of May 30, 2022. Business fundamentals, growth prospects, and analyst ratings have been discussed for each stock. Furthermore, the hedge fund sentiment has been determined through an analysis of 900 elite funds tracked by Insider Monkey at the end of Q1 2022.
Most Shorted Stocks to Watch in June
10. Carvana Co. (NYSE:CVNA)
Number of Hedge Fund Holders: 48
Float Shorted: 44.77%
Stock Price as of June 14: $21.03
Carvana Co. (NYSE:CVNA) is a Tempe, Arizona-based used car trader. Carvana Co. became one of the youngest companies to be a part of the Fortune 500 in 2021. In a short period of eight years, Carvana Co. has become the second-biggest online trader of used cars.
The stock has come under pressure recently due to an uncertain macroeconomic outlook and the logistical issues faced by the company. In its Q1 2022 results, Carvana Co. experienced a 14% volumetric growth to 105,000 units. However, gross profit shrunk by 12% YoY to $298 million due to the higher cost of buying used cars. This meant that the average gross profit per unit (GPU) fell from $4,537 to $2,833. Meanwhile, Carvana Co. had guided that it anticipated GPU declining to $4,000.
The stock fell to a 52-week low on June 13 as concerns related to high leverage and a weak demand outlook raised concerns amongst investors and analysts. Carvana Co. financed the $2.2 billion acquisition of ADESA from KAR Capital by issuing $1.6 billion worth of bonds to Apollo Global Management and obtaining the remaining funds from the secondary markets at a very high yield. On June 13, Daniel Imbro at Stephens slashed the price target on Carvana Co. from $100 to $38 due to these concerns and maintained an Equal Weight rating on the stock.
In its Q1 2022 investor letter, Saga Partners shared its insights on Carvana Co.. Here’s what the investment management firm said:
“I first wrote about Carvana in this 2019 write-up. I initially explained Carvana’s business, superior value proposition compared to the traditional dealership model, attractive unit economics, and how they were uniquely positioned to win the large market opportunity.
Since then, Carvana has by far exceeded even my most optimistic initial expectations. While the company did benefit following COVID in the sense that customers’ willingness to buy and sell cars through an online car dealer accelerated, the operating environment over the last two years has been very challenging. Carvana executed exceedingly well considering the shifting customer demand in what is a logistically intensive operation and what has been a tight inventory environment due to supply chain issues restricting new vehicle production.
Shares have come under pressure following their first quarter results, which reflected larger than expected losses. The quarter was negatively impacted by a combination of COVID-related logistical issues in their network that started towards the end of the fourth quarter as Omicron cases spread. Employee call off rates related to Omicron reached an unprecedented 30% that led to higher costs and supply chain bottlenecks. As less inventory was available due to these problems, it led to less selection and longer delivery times, lowering customer conversion rates.
Additionally, interest rates increased at a historically fast rate during the first quarter which negatively impacted financing gross profits. Carvana originates loans for customers and then sells them to investors at a later date. If interest rates move materially between loan origination and ultimately selling those loans, it can impact the margin Carvana earns on underwriting those loans…” (Click here to see the full text)
Out of the 912 hedge funds tracked by Insider Monkey at the end of Q1 2022, 48 funds held a stake in Carvana Co..
9. EVgo, Inc. (NASDAQ:EVGO)
Number of Hedge Fund Holders: 20
Float Shorted: 29.91%
Stock Price as of June 14: $8.02
EVgo, Inc. (NASDAQ:EVGO) has the biggest electric vehicle (EV) fast-charging network in the US. The Los Angeles, California-based company is betting on the EV boom through its more than 850 fast-charging stations spread across 30 states.
In a note issued to investors on May 12, Maheep Mandloi at Credit Suisse upgraded EVgo, Inc. stock from a Neutral to an Outperform rating with a target price of $14. The target price provides a potential upside of over 74% from the last closing price. The analyst highlighted that EVgo, Inc. stock is trading at an attractive valuation following the significant dip since the start of the year. Furthermore, the analyst sees multiple tailwinds for the firm due to potential incentives from the distribution of federal infrastructure funds. However, the weak Q1 2022 results have pressurized the stock as the company failed to surpass revenue estimates because of seasonality and the omicron variant impacting throughput. EVgo, Inc. posted revenue of $7.70 million, missing the consensus estimates by $1.22 million.
As of Q1 2022, 20 funds reported owning a stake in EVgo, Inc..
8. Veru Inc. (NASDAQ:VERU)
Number of Hedge Fund Holders: 9
Float Shorted: 32.07%
Stock Price as of June 14: $12.62
Veru Inc. (NASDAQ:VERU) is a Miami, Florida-based biotech company focused on developing treatments for breast cancer and prostate cancer.
Traders who have taken a short position in Veru Inc. stock see the company failing to receive an emergency use authorization for sabizabulin for high-risk COVID-19 patients. Veru Inc. is also exploring the use of sabizabulin for breast and prostate cancer.
The company finished Q1 2022 with a cash balance of $112 million and expects the balance to be sufficient to finance its operations for the next 12 months. If Veru Inc. receives approval from the FDA, it could generate healthy sales to fund its operations further. The use of sabizabulin decreased the mortality rate from 45% to 20% in high-risk COVID-19 patients as compared to the placebo group.
Veru Inc. was held by 9 hedge funds at the end of Q1 2022.
7. Lemonade, Inc. (NYSE:LMND)
Number of Hedge Fund Holders: 17
Float Shorted: 32.47%
Stock Price as of June 14: $16.84
Lemonade, Inc. (NYSE:LMND) is a New York-based technologically-driven insurance provider that deals with homeowners, pets, cars, and term life insurance.
Since the start of the year, Lemonade, Inc. stock has lost nearly half of its value. In a note issued to investors on May 11, Jason Helfstein at Oppenheimer lowered the price target on Lemonade, Inc. from $45 to $30 due to a decline in comparative valuations of the tech-insurance industry and a weaker outlook for the near-term loss ratio. The analyst maintained an Overweight rating on the stock despite the company missing Q1 2022 revenue estimates. It must be highlighted that Lemonade, Inc. reported growth in premium-per-customer due to the positive impact of bundling.
Overall, 17 hedge funds reported owning a stake in Lemonade, Inc. at the end of Q1 2022.
6. Vertex Energy, Inc. (NYSE:VTNR)
Number of Hedge Fund Holders: 21
Float Shorted: 27.02%
Stock Price as of June 14: $13.7
Vertex Energy, Inc. (NYSE:VTNR) is a Houston, Texas-based production and distribution company involved in alternative and conventional fuel sources. The company is invested in the recycling of motor oil and other petroleum products.
In a note issued on June 8, Michael Hoffman at Stifel increased the price target on Vertex Energy, Inc. from $14 to $20 and reiterated a Buy rating following the company’s participation in Stifel’s cross-sector insight (CSI) conference. The analyst updated his forecasts and target price to reflect the impact of the project upgrade and the near-term economics of traditional refining techniques. Vertex Energy, Inc. has expanded its refining capacity following the acquisition of Alabama-based Mobile Refinery from Shell. The company is to make the facility operational by Q1 2023, following the conversion of the hydrocracking unit to produce renewable diesel fuel.
Despite these positive developments, conservative investors are wary of Vertex Energy, Inc. stock as it is vulnerable to fluctuations. Commodity prices significantly impact the company, and they are currently volatile due to the Russia-Ukraine conflict. The stock is likely to be considered expensive during 2022 as analysts do not see the positive impact of the Mobile refinery coming into play until the first quarter of 2023.
Vertex Energy, Inc. was held by 21 hedge funds at the end of Q1 2022.
In addition to Vertex Energy, Inc., investors also have short positions in stocks such as Tesla, Inc., NVIDIA Corporation, and MicroStrategy Incorporated.
5. Upstart Holdings, Inc. (NASDAQ:UPST)
Number of Hedge Fund Holders: 25
Float Shorted: 31.78%
Stock Price as of June 14: $33.61
Upstart Holdings, Inc. (NASDAQ:UPST) is a San Mateo, California-based AI lending platform that uses non-conventional variables like education, employment status, and marital status to anticipate the creditworthiness of clients and connects with banks and credit unions to give out loans.
On May 20, David Chiaverini at Wedbush gave Upstart Holdings, Inc. an Underperform rating and lowered the price target from $20 to $15. The analyst revealed that Upstart and the Consumer Financial Protection Bureau had mutually terminated the no-action letter, which had provided immunity to Upstart Holdings, Inc. from being charged with fair lending law violations in connection with its proprietary algorithm. This development could result in lower loan originations.
Here’s what Vulcan Value Partners said about Upstart Holdings, Inc. in its Q1 2022 investor letter:
“Upstart Holdings Inc. is an artificial intelligence (AI) and cloud-based lending platform. Upstart’s stock price has been very volatile, but its value has grown steadily. Last year, the company grew its revenue by over 250% organically, which materially exceeded our expectations. In addition, the company continues to generate robust free cash flow and is launching new products to expand its business. Upstart’s value has increased consistently since we first purchased it. Following our discipline, we have added to our position when its stock price has declined and its price to value ratio has improved, and we have reduced our stake when its stock price has risen faster than its value.”
As of Q1 2022, Upstart Holdings, Inc. was held by 25 hedge funds.
4. MicroStrategy Incorporated (NASDAQ:MSTR)
Number of Hedge Fund Holders: 21
Float Shorted: 40.43%
Stock Price as of June 14: $152.15
MicroStrategy Incorporated is a Tysons, Virginia-based provider of business intelligence, cloud-based services, and mobile software.
The stock has been heavily shorted because MicroStrategy Incorporated could be forced to stake more tokens against its bitcoin-backed loan or risk a margin call on the loan due to a significant dip in Bitcoin price. If the price of bitcoin falls below the $21,000 level, MicroStrategy Incorporated would have to inject more capital or liquidate the collateral of the loan, which is 19,466 bitcoins. MicroStrategy Incorporated had obtained the loan from San Diego, California-based crypto bank Silvergate Capital. In the past six weeks, Bitcoin has lost 40% of its value, while MicroStrategy Incorporated has declined by 25%.
MicroStrategy Incorporated was discussed in the Q1 2021 investor letter of Alger. Here’s what the firm said:
“MicroStrategy Incorporated was among the top contributors to performance. MicroStrategy is a global leader in enterprise analytics software and services. MicroStrategy’s core software platform provides customers with visualization and reporting capabilities, mobility features, and custom applications to help with complex business questions. Today, MicroStrategy has over 4,000 customers worldwide. In August 2020, MicroStrategy decided to make bitcoin its preferred reserve currency. To date, MicroStrategy has purchased over 90,000 bitcoins at an aggregate purchase price of $2.17 bi11 ion and an average price of over $23,985 per bitcoin. Going forward, MicroStrategy plans to use excess cash generated by its core business to purchase additional bitcoin.
Shares of MicroStrategy outperformed in the first quarter due to the appreciation of the company’s bitcoin asset, as the price of bitcoin relative to the U.S. dollar rose materially in the quarter. This bitcoin appreciation was driven by concerns about U.S. dollar inflation as well as other public companies deciding to acquire bitcoin to diversify reserve assets. MicroStrategy is establishing itself as a thought leader in the bitcoin space, and the company hosted an event at its February user conference to help other organizations understand the benefits of bitcoin as a reserve asset. MicroStrategy’s core software business is also benefitting from its status as a leader in the bitcoin space, with the increased public attention aiding MicroStrategy’s recruitment and marketing efforts as the software business continue to transition to a cloud-based subscription model.”
MicroStrategy Incorporated was held by 21 hedge funds as of Q1 2022.
3. Nikola Corporation (NASDAQ:NKLA)
Number of Hedge Fund Holders: 16
Float Shorted: 28.96%
Stock Price as of June 14: $5.23
Nikola Corporation (NASDAQ:NKLA) is a Salt Lake City, Utah-based manufacturer of heavy-duty commercial battery EVs, fuel-cell EVs, and other energy solutions.
On June 9, the company revealed that its Nikola Tre battery EV had been approved by the New York Truck Voucher Incentive Program. The buyers of Nikola Tre BEV will now become eligible for incentives of up to $185,000 for every truck. The incentive is provided to encourage the adoption of heavy-duty EVs for commercial purposes. Nikola Corporation is also registered in California in a similar program aimed at achieving zero-emission. Despite the positive developments, the stock is still being considered a speculative stock by investors. The company has recently started earning revenue from operations while its costs remain high. On June 13, Chris McNally at Evercore ISI lowered the price target on Nikola Corporation from $14 to $10.
Nikola Corporation was held by 16 hedge funds at the end of Q1 2022.
2. Camping World Holdings, Inc. (NYSE:CWH)
Number of Hedge Fund Holders: 16
Float Shorted: 39.84%
Stock Price as of June 14: $25.57
Camping World Holdings, Inc. (NYSE:CWH) is a Lincolnshire, Illinois-based company that specializes in selling recreational vehicles (RVs) and their parts. Furthermore, the company is involved in selling camping supplies.
On May 5, Craig Kennison at Baird lowered the price target on Camping World Holdings, Inc. from $40 to $35 with an Overweight rating. Due to an uncertain economic outlook and expected inflation ahead, consumers are expected to cut down on discretionary expenditures like spending on RVs. During Q1 2022, Camping World Holdings, Inc. missed earnings forecasts due to high selling, general, and administrative (SG&A) expenses.
As of Q1 2022, 16 funds held a stake in Camping World Holdings, Inc. as of Q1 2022.
1. Beyond Meat, Inc. (NASDAQ:BYND)
Number of Hedge Fund Holders: 23
Float Shorted: 43.52%
Stock Price as of June 14: $22.27
Beyond Meat, Inc. (NASDAQ:BYND) is a Los Angeles, California-based developer and manufacturer of plant-based meat alternatives. The company announced on June 14 that its Cookout Classic value pack is available across 10,000 stores of notable retailers nationwide.
Traders shorting Beyond Meat, Inc. stock have been encouraged by a research note issued by Michael Lavery at Piper Sandler on June 7. The analyst maintained an Underweight rating on Beyond Meat, Inc. with a $12 target price. He highlighted that the positive response to the recently launched jerky is masking the overall slowdown in demand for the company’s products. Lavery does not have a positive stance on the rollout of the jerky and its success as opposed to the company’s previous launches in different categories.
Here’s what Singular Research said about Beyond Meat, Inc. in its Q3 2021 investor letter:
“BYND also was a low performer as the company warned of lower sales in the third quarter due to the delta variant and supply chain disruptions. The firm was also downgraded by Credit Suisse to Underperform from Neutral.”
Of the 912 hedge funds in Insider Monkey’s database, 23 funds held a stake in Beyond Meat, Inc. as of Q1 2022.
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This article is originally published at Insider Monkey.
