We recently published a list of 20 Underperforming Stocks Targeted By Short Sellers. In this article, we are going to take a look at where Magnolia Oil & Gas Corporation stands against other underperforming stocks targeted by short sellers.
Short interest refers to the percentage of publicly available shares that have been sold short. It is an indicator used by many investors to determine how strong a company’s bear thesis may be. Due to the nature of short selling, the short interest has become a popular indicator among investors.
The reason it is given so much weightage is that people betting against a stock have usually done solid research and are confident of a company’s downfall. They take unlimited risk, so when big investors or the smart money shorts a stock, people take notice. They try to unearth the red flags that may have prompted the high short interest.
We decided to dig deeper and try to find out where smart money sees trouble ahead. To come up with our list of 20 underperforming stocks targeted by short sellers, we looked at the worst-performing stocks of the last six months and then ranked them by the short interest.
Aerial view of an oil and natural gas drilling operation on a leasehold position.
Magnolia Oil & Gas Corporation (NYSE:MGY)
Short interest: 14.36%
6 months’ performance: -17%
Magnolia Oil & Gas Corporation operates as an independent natural gas and oil company. The company develops, acquires, explores, and produces natural gas, oil, and natural gas liquids reserves. Its properties are located mainly in the Giddings area and Karnes County.
The company’s short interest may be high, but it is trending downwards. Since October 2024, it has come down from 18.4% to 14.36%. This presents a possible short squeeze opportunity backed by improving fundamentals.
Magnolia Oil & Gas Corporation planned spending of nearly half a billion dollars on drilling and completions this year is likely to result in a 5% to 7% production growth. On top of this, efficiency improvements will result in more wells being drilled for the same cost. The company is unhedged and fully exposed to commodity prices as part of the management’s strategy. This could go either way for investors, but if it favors the company, the probability of a bull rally triggered by short covering is quite high.
READ NEXT: 20 Best AI Stocks To Buy Now and 30 Best Stocks to Buy Now According to Billionaires.
This article is originally published at Insider Monkey.