Hedge funds and other short sellers are betting against plenty of stocks even as the market sets new record highs. Many short sellers have pulled back since the start of the meme stock craze, but the practice of betting against stocks is still around. Some of the biggest stocks on the list of most-shorted names are struggling this year. But with interest rates falling and stocks broadly climbing this week, those targeted stocks could be candidates for a so-called short squeeze. A squeeze occurs when a stock’s gains spur short sellers to cover their positions by quickly purchasing shares to limit losses. In certain cases, this can create a feedback loop where the extra buying pressure forces other short sellers to do the same. These are the five stocks with a market cap of at least $2 billion that had the highest short interest as a percentage of float, or highly liquid stock, as of the end of May, according to FactSet. The list shows that hedge funds are looking for ways to bet against commercial real estate. Arbor Realty Trust and Medical Properties Trust are both real estate investment trusts, which are publicly traded vehicles for that sector. Another targeted area by hedge funds appears to be niche financial companies. Upstart is a personal lending company, and Trupanion is a pet insurance firm. Both commercial real estate and smaller financial firms could benefit from continued strength in the U.S. economy and interest rate cuts from the Federal Reserve. ImmunityBio is the type of speculative name often targeted by short sellers, as biotech stocks can see big swings in either direction based on clinical trial results. The company has multiple ongoing trials but reported just $40,000 in revenue for the first quarter. Within the last year, the stock has traded below $2 and above $9 per share. IBRX 1Y mountain ImmunityBio has been a volatile stock over the past 12 months. Two names outside the top five that are outperforming the broader market this year are Comstock Resources and Madrigal Pharmaceuticals . That performance could make them more likely to have a short squeeze in the near term, though the exact financial position of those short sellers is unknown. Notably, GameStop is not on the expanded list as a stock with at least 25% short interest. The meme stock benefited from a short squeeze during its 2021 rally but has fewer bets against it now. Short seller Citron Research said Monday that it had exited its position against the stock. — CNBC’s Nick Wells contributed reporting.
These are the stocks that short sellers are betting against even as the market rallies
Jun 13, 2024
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