These stocks are primed for a short squeeze.
Short selling has gotten a lot of attention in 2021. Groups of retail traders on Reddit and other social media platforms have successfully orchestrated targeted buying campaigns in some of the most heavily shorted stocks in the market, triggering short squeezes and extreme volatility in the market. A short squeeze is a large, temporary spike in a stock’s share price that occurs when a significant number of short sellers are forced to cover, or buy out of, their positions. Here are eight stocks that are set up to potentially be the next major short squeezes, according to Ortex Analytics.
Fortress Transportation and Infrastructure Investors LLC (FTAI)
Fortress Transportation and Infrastructure Investors owns and operates assets used to transport people and goods. Ortex estimates that 44.2% of the stock’s float, or free-trading shares, is currently held in short positions, making it an excellent candidate for a short squeeze. Short squeezes often require a bullish catalyst to pressure short sellers. Fortress may have an excellent catalyst given it is planning on splitting its aerospace and infrastructure businesses into two companies and executing a spinoff before the end of 2021. While they wait on a possible short squeeze, Fortress investors are also getting paid a 4.6% dividend.
Nikola Corp. (NKLA)
A handful of popular electric vehicle stocks have fallen from grace in 2021, and Nikola may be the most high-profile example. On July 29, a federal grand jury officially charged Nikola founder Trevor Milton with three counts of criminal fraud for lying to investors. Milton resigned from the company last September after short seller Hindenburg Research accused him and the company of spreading “an ocean of lies.” Nikola shares are down 75% in the past 12 months, but short sellers appear to see more pain ahead. Nikola’s short interest is 29.9% of its float, according to Ortex.
Workhorse Group Inc. (WKHS)
Workhorse is another popular EV stock that has struggled mightily, dropping nearly 73% in the past six months. Workhorse investors received devastating news in March when the U.S. Postal Service chose Oshkosh Corp. (OSK) over Workhorse for a critical next-generation delivery vehicle contract. Workhorse is currently suing over the more than $3 billion contract, but short sellers are clearly not optimistic about the company’s outlook. Any positive news about the lawsuit or an announcement about another major vehicle order could be enough to ignite a Workhorse short squeeze, and about 36.7% of the stock’s float is currently held in short positions.
Blink Charging Co. (BLNK)
Blink Charging owns and operates EV charging equipment. The stock started to draw attention from short sellers when it rallied from around $2 in mid-2020 to as high as $64.50 in January 2021. Prominent short seller and Citron Research editor Andrew Left called Blink a “total scheme” and a “joke” back in November 2020 and said the stock should be trading back under $10. Since that time, Blink’s short interest has steadily grown from around 12.7% of its float to 39.1% of its float — potentially setting the table for a short squeeze at some point.
Agora Inc. (API)
Agora is a platform for real-time voice and video engagement. Unfortunately, the company has significant exposure to the Chinese education industry. In July, Agora shares tumbled when the Chinese Communist Party specifically targeted for-profit education companies with a set of new regulations. The crackdown on education companies is part of a broader effort by China to rein in tech companies. Agora shares are now down 70% in the past six months, but short sellers see more downside ahead. Agora’s short interest was just 10.4% of its float in mid-January, but that figure is now 36.7%.
DermTech Inc. (DMTK)
DermTech is attempting to completely change the way skin cancer is detected by using noninvasive genomic testing rather than a combination of visual inspection and surgical biopsy. A DermTech patch is simply applied to a patient’s skin and later sent off to a lab for testing. The company says its approach is much more accurate than the biopsy method and much less costly as well, but short sellers seem skeptical. DermTech’s short interest is 36.8% of its float, according to Ortex. If the stock starts moving higher, it might not take much to spark a short squeeze.
KnowBe4 Inc. (KNBE)
Security software company KnowBe4 is a leader in security awareness training. The company completed its initial public offering in May, pricing its IPO shares at $16. In June, KnowBe4 shares surged as high as $36.67, grabbing the attention of short sellers. The stock’s short interest has grown from just 8.5% of its float on May 28 to 34.5%. KnowBe4 also has the smallest float of all the stocks on this list at just 13.9 million, according to MarketWatch. That low float means any potential KnowBe4 short squeeze could be particularly volatile.
iRobot Corp. (IRBT)
Roomba maker iRobot was part of the initial 2021 short squeeze back in January, which propelled its stock from around $80 to as high as $197.40 in about three weeks. That short squeeze drove out a large number of short sellers, and iRobot’s short interest dropped from 38.1% of its float on Jan. 15 to 16.9% of its float on May 28. Since late May, short sellers have returned, and iRobot’s short interest is back up to 33.5% of its float. If January is any indication, another iRobot short squeeze could produce some major upside.
Short squeeze stocks that could take off in August:
— Fortress Transportation and Infrastructure Investors LLC (FTAI)
— Nikola Corp. (NKLA)
— Workhorse Group Inc. (WKHS)
— Blink Charging Co. (BLNK)
— Agora Inc. (API)
— DermTech Inc. (DMTK)
— KnowBe4 Inc. (KNBE)
— iRobot Corp. (IRBT)
