Below we present the list of 5 Best Short Squeeze Stocks to Buy Now. For our methodology and a more comprehensive list please see 12 Best Short Squeeze Stocks to Buy Now.
5. Arcutis Biotherapeutics, Inc. (NASDAQ:ARQT)
Number of Hedge Fund Shareholders: 22
Short Interest: 33.7%
Days to Cover: 13.1
There was a surge in hedge fund ownership of Arcutis Biotherapeutics, Inc. (NASDAQ:ARQT) during the third quarter of 2022, as the number of smart money shareholders of the company nearly doubled. The majority of new positions were on the small side however, though Bihua Chen’s Cormorant Asset Management did add 1 million ARQT shares to its 13F portfolio during the quarter.
Analysts are extremely bullish on Arcutis Biotherapeutics, Inc. (NASDAQ:ARQT), which is working on treatments for various skin disorders, based on their price targets on the stock. TD Cowen has a $65 price target on ARQT shares, while Mizuho’s price target stands at $57. Morgan Stanley also has a $47 price target and ‘Overweight’ rating on the stock.
Given that Arcutis Biotherapeutics, Inc. (NASDAQ:ARQT) shares currently change hands for less than $10, those are significant projections. Even Truist, which recently scaled back its projections for sales of Arcutis’ psoriasis treatment Zoryve to $31 million this year and $125 million next year from earlier projections of $40 million and $157 million respectively, has a $40 price target on Arcutis.
4. Plug Power, Inc. (NASDAQ:PLUG)
Number of Hedge Fund Shareholders: 23
Short Interest: 52.8%
Days to Cover: 5.7
Short sellers may not think much of Plug Power, Inc. (NASDAQ:PLUG)’s valuation at the moment, but it’s a different story with analysts. We recently ranked PLUG as one of the 5 Most Promising EV Stocks According to Analysts, with the stock having greater than 90% upside potential to analysts’ average price targets on the stock as of February 14.
Hedge funds have been torn on Plug Power, Inc. (NASDAQ:PLUG) in recent quarters, with their ownership of the stock fluctuating wildly between quarters. Hedge funds steadily bought into the company between 2019 and the first quarter of 2022, but the number of smart money shareholders has since fallen by 32%.
One of the biggest issues with Plug Power, Inc. (NASDAQ:PLUG) is that the company has failed to generate positive cash flow for over two decades and its rate of cash burn has increased significantly in the past couple years. That trend continued in Q1, as while PLUG grew revenue by 49% year-over-year, it still widely missed earnings estimates, losing $0.35 per share during the quarter. And despite the strong revenue growth, the company’s full year revenue guidance also came in below estimates.
3. Allogene Therapeutics, Inc. (NASDAQ:ALLO)
Number of Hedge Fund Shareholders: 23
Short Interest: 52.8%
Days to Cover: 19.6
Allogene Therapeutics, Inc. (NASDAQ:ALLO) has been one of the most heavily shorted stocks for several quarters and short sellers continue to be on an all-out attack, with more than 50% of the company’s shares being sold short. The swarm of short sellers would also need close to 20 days to cover all their positions based on typical trading volumes, putting them in prime position for a squeeze.
Hedge funds have remained relatively bullish on Allogene Therapeutics, Inc. (NASDAQ:ALLO) in recent quarters, with no fewer than 18 funds being long ALLO during any quarter since the middle of 2020. Baker Bros. Advisors, co-founded by brothers Julian and Felix Baker, added ALLO to its 13F portfolio during Q1. The fund is one of the most successful healthcare-focused funds in the world.
Analysts are also quite bullish on Allogene Therapeutics, Inc. (NASDAQ:ALLO) in contrast to the majority bearish investor community. JMP Securities has a $15 price target and ‘Buy’ rating on the stock and believes that it represents a “unique opportunity” given its strong cash flow and promising ALLO-316 and ALLO-501A studies.
2. Sunnova Energy International Inc. (NYSE:NOVA)
Number of Hedge Fund Shareholders: 27
Short Interest: 25%
Days to Cover: 5.4
Landing in second on our list of the best short squeeze stocks to buy now is Sunnova Energy International Inc. (NYSE:NOVA), which hedge funds have been hanging on to with a vice-like grip in recent quarters. The number of funds long NOVA has barely budged over the past two years, with Jos Shaver’s Electron Capital Partners and Steve Cohen’s Point72 Asset Management being some of the firm’s biggest bulls during that time.
Sunnova Energy International Inc. (NYSE:NOVA) shares have gained 25% since May 19 and are now up slightly year-to-date. Nonetheless, NOVA shares are only flat since late-April, when the company secured a $3 billion conditional partial loan guarantee from the Department of Energy to help expand its reach.
A week after that deal was announced, Truist raised its price target on Sunnova to $35 from $28, noting the company’s financial and competitive benefits, as well as its attractive valuation given that shares are trading at a 20% discount to the company’s net contracted customer value.
The ClearBridge Investments Small Cap Strategy discussed why Sunnova Energy International Inc. (NYSE:NOVA) benefited from the passage of the Inflation Reduction Act in its Q3 2022 investor letter:
“Within the utilities sector, solar power and energy storage company Sunnova (NYSE:NOVA) saw its share price benefit from passage of the Inflation Reduction Act legislation, which includes an array of new and extended tax credits that should not only support but enhance the company’s long-term growth prospects.”
1. Cinemark Holdings, Inc. (NYSE:CNK)
Number of Hedge Fund Shareholders: 29
Short Interest: 25.7%
Days to Cover: 10.4
One of the Top 15 Live Entertainment Companies in the World, Cinemark Holdings, Inc. (NYSE:CNK) tops the list of best short squeeze stocks to buy now. The company not only has the highest hedge fund ownership among good short squeeze candidates, but also saw a surge in hedge fund shareholders during Q1, showcasing the newfound bullishness several funds have towards CNK.
Cinemark Holdings, Inc. (NYSE:CNK), the second-largest theater operator in the U.S., has struggled to fill its theaters in the wake of the pandemic, but did enjoy a strong Q1, as revenue rose by 33% year-over-year to $611 million and the company generated positive operating cash flow. With 110 wide-release films now tracking for 2023 releases, Cinemark is confident that its results will exceed expectations this year.
Given its positive outlook for 2023, the shorts are already on the run, as CNK shares have gained 118% this year. Longer-term, there are still serious questions about what the box office’s growth will look like, with Credit Suisse projecting post-2023 growth to be “tepid”. Cinemark Holdings, Inc. (NYSE:CNK) shares are starting to look fairly valued at this point, but with the short interest still above 25%, the stock could yet have more room to run up before a later pullback.
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