Stocks to buy

While trading with the masses may generally be the wisest approach, contrarian gamblers may accrue dramatic profitability through short-squeeze stocks. To get everyone on the same page, coordinated investments in heavily shorted securities can potentially trigger ridiculous upside as bears panic out of their positions. This panicking results in bears buying the affected securities (since shorting is the opposite of going long).

Of course, participants of this daring maneuver need to be aware of one harsh reality: if it were so easy to make profits by simply moving against the grain, everybody would do it. In other words, the risk to those merely buying short-squeeze stocks because of their contrarian potential may end up holding a bag of steaming excrement. That’s the price you may end up paying.

Still, with the popularity of this trading mechanism accelerating during the new normal, some traders might luck out. Below are short-squeeze stocks that could make you rich.

ALLO Allogene Therapeutics $5.08
YOU Clear Secure $26.32
CHWY Chewy $34.87
SKIN Beauty Health $13.00
WRLD World Acceptance $83.97
BYND Beyond Meat $14.82
CVNA Carvana $9.44

Allogene Therapeutics (ALLO)

Source: Vova Shevchuk / Shutterstock.com

Based in San Francisco, California, Allogene Therapeutics (NASDAQ:ALLO) focuses on developing allogeneic chimeric antigen receptor T-cell products to find the next immunologic breakthrough in cancer. Although seemingly relevant, Allogene struggled badly in the market. Since the beginning of the year, ALLO gave up more than 20% of equity value. Additionally, in the trailing year, it’s down nearly 48%.

Therefore, it’s not terribly surprising that ALLO found itself the focus of bearish speculation. According to data from Benzinga, ALLO features a short interest of 43.98% of its float. Also, its short interest ratio stands at 21.7 days to cover. Both stats are elevated against normal values, particularly the former.

Financially as well, Allogene could use some work. For instance, its Altman Z-Score sits at 0.1 below breakeven, reflecting a distressed enterprise at risk of bankruptcy.

Nevertheless, Wall Street analysts peg ALLO as a consensus strong buy. Their average price target comes out to $18.71, implying nearly 308% upside potential. Thus, ALLO ranks among the short-squeeze stocks to consider.

Clear Secure (YOU)

Source: Epic Cure / Shutterstock

An American technology company, Clear Secure (NYSE:YOU) operates a biometric travel document verification platform. Essentially, Clear Secure enables frequent flyers to quickly go through security lines at major airports. Despite the obvious benefit, the market doesn’t see it that way. Since the Jan. opener, YOU stock fell nearly 10%. In the past 365 days, the security tumbled almost 17%.

Unfortunately for those betting on Clear Secure, the bears have successfully taken down shares for “negative” profits. Presently, YOU features a short interest of 44.32% of its float. Also, the short interest ratio is quite elevated at 9.7 days to cover.

Fundamentally, though, short traders might be making a mistake. While domestic travel may be cooling down from various consumer economy pressures, certain data suggests that international travel demand is robust. This dynamic implies that wealthier folks are moving through the airports, thus potentially benefitting Clear Secure’s business.

Notably, analysts peg YOU as a consensus moderate buy. Their average price target stands at $37, implying over 47% upside potential. Therefore, YOU’s one of the short-squeeze stocks to put on your radar.

Chewy (CHWY)

Source: PX Media / Shutterstock

An intriguing idea among short-squeeze stocks to buy, Chewy (NYSE:CHWY) benefits from a relevant business. An online retailer of pet food and other pet-related, Chewy feeds America’s love for furry little creatures. At the same time, CHWY struggles for momentum this year, shedding about 3%. In the trailing one-year period, shares lost more than 20% of market value.

So, how did such an enticing opportunity print such red ink? Recently, Chewy’s management team disclosed that the U.S. consumer has become more measured in spending patterns. Therefore, the bears saw a chance to accrue negative profits. Per Benzinga, CHWY’s short interest hit 35.41% while its short interest ratio came out to 5.1 days to cover.

However, CHWY ranks among the potential short-squeeze stocks to target because of its overall decent financials. Featuring a cash-healthy balance sheet, Chewy commands a robust three-year revenue growth rate of 24.7%.

Finally, analysts peg CHWY as a consensus moderate buy. Their average price target stands at $46.13, implying over 34% upside potential.

Beauty Health (SKIN)

Source: Zurijeta / Shutterstock.com

A skincare specialist, Beauty Health (NASDAQ:SKIN) loves its word salad when it comes to describing itself. That annoyance aside, the company delivers the goods. In 2022, it posted nearly $366 million in net sales, providing millions of positive experiences for consumers across more than 90 countries. Sure enough, the effort paid off. Since the Jan. opener, SKIN gained more than 39% of equity value.

However, in the trailing year, it’s down 16%. Further, the bears don’t seem too impressed, making it one of the short-squeeze stocks. Currently, SKIN’s short interest pings at 33.8% while its short interest ratio comes out to 10.7 days to cover.

Despite the longer-term red ink, SKIN might rise higher due to the return to the office. Basically, people have greater incentive to look presentable because of the ending of remote operations. Lastly, analysts peg SKIN as a consensus moderate buy. Their average price target stands at $17.50, implying over 36% upside potential.

World Acceptance (WRLD)

Source: shutterstock.com/CC7

Based in Greenville, South Carolina, World Acceptance (NASDAQ:WRLD) is a personal installment loan provider. Per its website, World Acceptance’s mission is to help its clients manage life’s unexpected expenses. Thanks to its utilitarian business, WRLD shot higher, gaining over 25% since the Jan. opener. However, the bears maintain control, with shares giving up 59% of equity value in the past 365 days.

Not shockingly, then, the bears saw easy money with World Acceptance. Presently, WRLD’s short interest hit 55.87% while its short interest ratio came out to 9.4 days to cover. Still, despite the sharp decline in the charts, WRLD might rank among the short-squeeze stocks to target. Fundamentally, the need for loan providers may increase as economic pressures build.

Now, when it comes to analyst coverage, WRLD presents a tricky case. Most recently, BMO Capital’s James Fotheringham pegs WRLD a sell. In addition, the expert believes the price may fall to $32, representing nearly 61% downside risk. However, if you really want to go contrarian with your short-squeeze stocks, World Acceptance could be tempting.

Beyond Meat (BYND)

Source: Freedom365day / Shutterstock.com

Fundamentally, I’m torn about mentioning Beyond Meat (NASDAQ:BYND) as one of the short-squeeze stocks. As a narrative, Beyond Meat aligns with refining consumer tastes. Essentially, younger consumers gravitate toward sustainable products (within reason). Having tried Beyond products myself, I can attest that it’s one tasty way to go green. Unfortunately, the price point presents huge challenges for hurting consumers.

To go green, you must fork over a premium in green, which doesn’t seem right. Usually, the fake product should sell cheaper than the real deal because, you know, it’s fake. However, animal-protein providers benefit richly from economies of scale, something that Beyond Meat lacks right now. Therefore, BYND’s short interest hits at just under 39%. Its short interest ratio comes out to 7.3 days to cover.

Still, shifting consumer trends may be the saving grace for bullish contrarians of BYND stock. For me, this trade is too rich for my blood but it’s available if you disagree.

However, investors should realize that analysts peg BYND as a consensus moderate sell. Also, their price target sits at $11.50, implying nearly 22% downside risk.

Carvana (CVNA)

Source: Chompoo Suriyo / Shutterstock.com

I’m not surprised about Carvana (NYSE:CVNA) ranking among the short-squeeze stocks because the business on many levels lacks sense. That’s why over the trailing one-year period, CVNA hemorrhaged over 91% of market value. To summarize, the need for contactless purchases of personal vehicles faded because few people are scared of Covid-19. Tack on pressures such as high inflation and people look for discounts, not service premiums.

Therefore, according to data from Benzinga, Carvana attracts the highest short interest right now at 66.75%. Still, such intense bearishness continues to attract contrarian-minded speculators. As evidence, despite the terrible fundamentals impacting Carvana, CVNA stock nearly doubled in value since the January opener.

On the positive side as well, the return to the office may spark greater vehicular travel. With people perhaps lacking time, Carvana just might become relevant again. Still, it’s a risky trade. Presently, analysts peg CVNA as a consensus hold. Their average price target stands at $9.92, implying just over 7% upside potential.

On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.

Articles You May Like

Faraday Future (FFIE) Stock: To the Moon or Straight to Zero?