In this piece, we will take a look at the 11 best high short interest stocks to buy now. If you want to skip our introduction to short selling and short interest, then take a look at 5 Best High Short Interest Stocks To Buy Now.
Short selling is one of the most controversial practices on the stock market. As opposed to traditional investing, which sees investors buy a firm’s shares in hopes of a potential share price appreciation to cash out and make a profit, short selling works in the opposite way. Simply put, it sees an investor borrow the shares of a stock, sell them on the market, and then if the share price drops, scoop them up again to return the borrowed shares and make a profit. There are other ways to short a security as well, and these include derivatives contracts that allow the investor to buy the security at a lower price and then sell it for a higher price.
Naturally, the ability to profit off of somebody else’s losses generates a lot of debate on the market. The detractors argue that short selling ends up negatively affecting the price of the shorted security simply because a position has been unveiled. At the same time, those in favor of short selling believe that it helps balance out the market and provides incentives to investors to root out financial impropriety or other structural weaknesses at a firm. One of the most well known investors who takes the latter viewpoint is Warren Buffett of Berkshire Hathaway. In a 2006 interview with The Motley Fool, the famed investor commented:
As you know, we have a friend who’s been outspoken on naked shorting. I don’t have a great problem with it. If anyone wants to do that with Berkshire, more power to ’em.
Companies with a large short interest very often have been revealed as frauds or semi-frauds — not the one my friend runs. If someone is running something semi-fraudulent, they’re probably pretty good at it. It’s a very tough game and tough emotionally. If you buy, it can go down 20 points or up indefinitely.
At the same time, while short selling provides an opportunity to make hefty profits, should the underlying security’s price fail to drop, then the investor is faced with what is called a short squeeze (for more on this, check out 12 Best Short Squeeze Stocks to Buy Now). A hedge fund billionaire who has been at the receiving end of a short squeeze is Stanley Druckenmiller. Mr. Druckenmiller has decades of experience on the stock market, and before he started to dedicate all of his time to his hedge fund, he worked for George Soros and managed the Quantum Fund. Mr. Druckenmiller is one of the most well known short investors of our time, and one of his most successful short plays came in 1992 when he and Mr. Soros correctly predicted that the Bank of England would be unable to defend the British Pound’s value. They proceeded to short the currency and walked away with a cool $1 billion in profits. However, fate wouldn’t be so kind to Mr. Druckenmiller a couple of years later in the midst of what is now known as the Dot Com bubble. This period in the stock market’s history saw widespread speculation on the future of technology stocks as the Internet feverishly captured public attention.
While Mr. Druckenmiller was quite astute in predicting that several technology stocks were just bubbles during this time, the timing of his decision to short the stocks of 12 companies was wrong and he ended up losing three times the money that he had actually put in his short position.
He recalled the experience and shared his perspective on short selling in a recent interview where he outlined:
Our shorts have been fine this year, except my index shorts which has been a disaster. But, we always short the same way. I just try and look at the current situation and then I try and think of a situation 12 to 18 months from now based on my forecast. By then if I think the security price is going to be less, then I short them. Frankly, I’m not sure I’ve ever made money. If I took back the last 40 years, I’m afraid to look, I’ve never had a down year, but I’m not sure I made money in shorts. I like it, it’s fun, but you can get your head handed to you. It’s a game that really only professional; and they mass against you. If you’re dead wrong on a long, you can lose a hundred percent. If you’re dead wrong on a short, you can lose ten times your money. When I was at Soros, I shorted $200 million worth of internet stocks in March of 99′. And in three weeks covered them at a $600 million loss. I lost $600 million on a $200 million investment in three weeks. I was short 12 stocks, they all went bankrupt. Every one of them.
The shares of companies that have been sold short are called short interest and they provide a useful way to see which way the sharks of short selling are swimming. Today, we’ve done just this and decided to see which stocks these sharks have gathered around with the top three picks being Wayfair Inc. (NYSE:W), Franchise Group, Inc. (NASDAQ:FRG), and Carvana Co. (NYSE:CVNA).
Image by Gerd Altmann from Pixabay
Our Methodology
To compile our list of the best high short interest stocks to buy we first compiled a list of 40 companies with high short interest as a percentage of their float. Then, the number of hedge funds that had bought their shares as of the second quarter of 2023 was determined through Insider Monkey’s database of 910 hedge funds.
11 Best High Short Interest Stocks To Buy Now
11. Tupperware Brands Corporation (NYSE:TUP)
Number of Hedge Fund Investors In Q2 2023: 20
Short Interest Percentage: 27.72%
Tupperware Brands Corporation (NYSE:TUP), as the name suggests, is a kitchen products and packaging company. It is the latest stock that is part of the meme stock mania, as the shares have appreciated by 62% over the past month. Year to date though the stock is down by 37% and is rated as Hold on average by analysts.
During this year’s second quarter, 20 out of the 910 hedge funds part of Insider Monkey’s database had held a stake in Tupperware Brands Corporation (NYSE:TUP). Out of these, the firm’s largest shareholder is D. E. Shaw’s D E Shaw since it owns 2.1 million shares that are worth $1.7 million.
Along with Franchise Group, Inc. (NASDAQ:FRG), Wayfair Inc. (NYSE:W), and Carvana Co. (NYSE:CVNA), Tupperware Brands Corporation (NYSE:TUP) is a stock with high short interest that hedge funds are buying.
10. Biomea Fusion, Inc. (NASDAQ:BMEA)
Number of Hedge Fund Investors In Q2 2023: 21
Short Interest Percentage: 28.48%
Biomea Fusion, Inc. (NASDAQ:BMEA) is a small biotechnology company that develops cancer treatments. Its second quarter was the first among the four latest in which the firm beat analyst EPS estimates and the stock is rated Strong Buy on average.
Insider Monkey took a look at 910 hedge funds for their June quarter of 2023 investments and discovered that 21 had invested in the firm. Biomea Fusion, Inc. (NASDAQ:BMEA)’s biggest hedge fund shareholder is Bihua Chen’s Cormorant Asset Management through a stake worth $78 million.
9. SpringWorks Therapeutics, Inc. (NASDAQ:SWTX)
Number of Hedge Fund Investors In Q2 2023: 22
Short Interest Percentage: 26.51%
SpringWorks Therapeutics, Inc. (NASDAQ:SWTX) is a biotechnology firm whose products target cancers and other serious diseases. It is another stock that is rated Strong Buy on average by analysts, with the average share price target also penning in a nearly $23 upside.
By the end of Q2 2023, 22 out of the 910 hedge funds surveyed by Insider Monkey had bought SpringWorks Therapeutics, Inc. (NASDAQ:SWTX)’s shares. Samuel Isaly’s OrbiMed Advisors owns the largest stake among these, courtesy of its $109 million investment.
8. bluebird bio, Inc. (NASDAQ:BLUE)
Number of Hedge Fund Investors In Q2 2023: 22
Short Interest Percentage: 27.20%
bluebird bio, Inc. (NASDAQ:BLUE) is yet another biotechnology company. Its treatments target genetic diseases. The firm’s shares have been tanking this year, due to a series of bad news such as it missing the FDA’s deadline for submitting licensing applications for a gene therapy.
After digging through 910 hedge funds for their second quarter of 2023 shareholdings, Insider Monkey discovered that 22 had held a stake in the company. bluebird bio, Inc. (NASDAQ:BLUE)’s biggest hedge fund shareholder is Kevin C. Tang’s Tang Capital Management since it owns 7.3 million shares that are worth $24 million.
7. Allogene Therapeutics, Inc. (NASDAQ:ALLO)
Number of Hedge Fund Investors In Q2 2023: 22
Short Interest Percentage: 35.77%
Allogene Therapeutics, Inc. (NASDAQ:ALLO) is an American firm that develops cancer treatments. Despite the fact that its shares are down by 33% year to date, the stock is still rated Strong Buy on average with a $13 upside based on the average share price target.
Insider Monkey’s June quarter of 2023 survey covering 910 hedge funds outlined that 22 had bought and invested in Allogene Therapeutics, Inc. (NASDAQ:ALLO)’s shares. Among these, the largest investor is Michael Rockefeller and Karl Kroeker’s Woodline Partners through a stake worth $26.4 million.
6. SL Green Realty Corp. (NYSE:SLG)
Number of Hedge Fund Investors In Q2 2023: 22
Short Interest Percentage: 25.30%
SL Green Realty Corp. (NYSE:SLG) is a real estate investment trust. The fact that it makes an appearance on our list of stocks with high short interest is unsurprising since the office REIT sector has been one of the worst performers this year due to high debt and changing working patterns.
22 of the 910 hedge funds polled by Insider Monkey had bought SL Green Realty Corp. (NYSE:SLG)’s shares as of Q2 2023. Out of these, the firm’s largest stakeholder is Anand Parekh’s Alyeska Investment Group courtesy of a $62 million stake.
Wayfair Inc. (NYSE:W), SL Green Realty Corp. (NYSE:SLG), Franchise Group, Inc. (NASDAQ:FRG), and Carvana Co. (NYSE:CVNA) are some high short interest stocks being favored by hedge funds.
Click to continue reading and see 5 Best High Short Interest Stocks To Buy Now.
Suggested Articles:
- Jim Chanos’ 10 Short Positions in 2023
- Michael Burry is Shorting the Market (Again) and Selling These 10 Stocks
- 10 Oversold Blue Chip Stocks To Buy
Disclosure: None. 11 Best High Short Interest Stocks To Buy Now is originally published on Insider Monkey.
