7 Potential Short-Squeeze Stocks Poised for Rapid Gains (2024)

You want potential short-squeeze stocks that could have the bears running for cover? Great, we got ‘em right here! But first, we need to know the rules of the game. Let’s start with the definitions:

  • Short interest: Number of shares borrowed from brokers to initiate the short trading activity.
  • Short interest percentage of float: The percentage of the publicly available share count being “earmarked” as a short position.
  • Short interest ratio (i.e. days to cover): The number of trading sessions necessary for bears to unwind all their short positions.

Conceptually, it’s important to understand how potential short-squeeze stocks materialize.

  • Short traders borrow the target shares from a broker, sell them in the open market and hope that they fall in value. If they do, the bears can scoop up the cheapened securities, return them to the broker and pocket the difference.
  • However, a squeeze materializes if the security rises in value.
  • The more the stock rises, the more difficult life becomes for the bear: mitigate the pain now or hope for the best? Of course, misplaced hope can lead to financial disaster.

By stacking more of the odds in your favor – high short interest relative to float and ratio, analyst optimism, hedge fund buying – your contrarianism may pay off. Below are compelling short-squeeze candidates to consider.

Westrock Coffee (WEST)

7 Potential Short-Squeeze Stocks Poised for Rapid Gains (1)

Source: Evgeny Karandaev/ShutterStock.com

Based in Little Rock, Arkansas, Westrock Coffee (NASDAQ:WEST) bills itself as a leading integrated coffee (and related ingredients) solutions provider. I wish the company would just say that clearly upfront on its website rather than have me dig for it in its Form 10-K but here we are. Thanks possibly to a surprisingly robust labor force, analysts rate shares a consensus moderate buy.

Where WEST becomes a compelling idea for potential short-squeeze stocks is its core statistics. Per Fintel, Westrock prints a short interest of 17.75% of its float. Even more conspicuously, its short-interest ratio stands at 45.66 days to cover. Given that there are about 20 to 22 business days (i.e. trading sessions) per month, the bears will need more than two calendar months to cover their short positions.

If something goes wrong with their trade, WEST could rise up in a hurry. Oh yeah, something could go very wrong because according to TipRanks, hedge fund sentiment for this security is “positive.” Therefore, WEST seems like a solid idea for short-squeeze candidates.

Encore Wire (WIRE)

7 Potential Short-Squeeze Stocks Poised for Rapid Gains (2)

Source: ESB Professional / Shutterstock.com

An industrial play among potential short-squeeze stocks, Encore Wire (NASDAQ:WIRE) is a leading manufacturer of wire and cable products. Per its website, it features innovations in product development and unparalleled service. With the U.S. economy proving incredibly resilient despite myriad pressure points, WIRE has been robust, moving up 39% in the trailing year. Still, the bears are skeptical, making Encore an intriguing contrarian play.

Right now, D.A. Davidson pegs WIRE a buy with a $240 price target, implying over 13% upside potential. Info from Fintel shows that WIRE’s short interest comes in at 24.26% of its float. Also, the short-interest ratio lands at 24.93 days to cover. Adding to the heat for the bears, hedge fund sentiment for Encore is positive, with total exposure rising 8% between the second quarter to Q3 of last year.

What really makes WIRE one of the short-squeeze candidates is the lack of glaring financial vulnerabilities. Featuring no debt and consistent profitability, it’s difficult to see WIRE collapsing. Use this to your advantage if you’re a speculator.

Trupanion (TRUP)

7 Potential Short-Squeeze Stocks Poised for Rapid Gains (3)

Source: Shutterstock

A pet insurance provider, Trupanion (NASDAQ:TRUP) lost almost 51% of its equity value in the past 52 weeks. It’s understandable. As I mentioned in my segment in CGTN America’s Global Business program, the inflation rate for pet-related products is about twice that for regular consumer goods. Therefore, it’s not shocking that costs for related services such as insurance have increased as well.

By that logic, it’s also not surprising that TRUP is one of the potential short-squeeze stocks. With so much red ink, it’s invariable that at least some believe that the pain will continue. However, analysts are willing to stay the course, rating shares a consensus moderate buy with a price target of $37.67. That comes out to potential growth of over 37%.

Per Fintel, TRUP’s short interest stands at 36.12% of its float. Also, its short interest ratio is 21.26 days to cover. A clear wrinkle to this trade is per TipRanks, Trupanion’s hedge fund confidence signal is positive. Therefore, it’s one of the short-squeeze candidates to put on your radar.

MGP Ingredients (MGPI)

7 Potential Short-Squeeze Stocks Poised for Rapid Gains (4)

Source: Shutterstock

Billed as a premium spirits manufacturer, MGP Ingredients (NASDAQ:MGPI) encountered some choppiness in 2023. Over the past 52 weeks, MGPI ended up losing about 7% of its equity value. However, at one point last year, shares were trading hands above the $120 level. If the underlying consumer economy improves, MGP Ingredients could be an interesting idea for potential short-squeeze stocks.

At the moment, the bears are not giving the company much of a chance. MGPI’s short interest comes in at 21.26% of its float. Also, the short interest ratio is elevated at just over 20 days to cover. Still, these inauspicious signals seemingly ignore the overwhelmingly bullish sentiment for MGPI among analysts. Specifically, it’s a unanimous strong buy with a $131.40 price target, projecting nearly 46% growth potential.

Now, it’s important to point out that between Q2 2022 and Q1 2023, hedge funds began exiting out of MGPI. Still, between Q2 and Q3 of last year, these funds increased their exposure by almost 19%. With the big dogs buying in recently, MGPI could be one of the short-squeeze candidates.

Bowlero (BOWL)

7 Potential Short-Squeeze Stocks Poised for Rapid Gains (5)

Source: Alextype/Shutterstock.com

A delightful oddball among potential short-squeeze stocks, Bowlero (NYSE:BOWL) is the world’s largest owner and operator of bowling entertainment centers. Per its website, Bowlero delivers unique experiences to over 40 million guests at approximately 350 locations throughout the U.S. However, BOWL’s chart performance betrays its relevance to the entertainment space, with shares down nearly 14% in the trailing year.

Even worse, since the beginning of the year, BOWL slipped more than 16%. As a result, the bears began licking their lips. Short interest jumped to 90.68% of its float while the short interest ratio stands at 21.88 days to cover. Some evidence from Fintel points to a possible widescale reduction in shares available for shorting activities. Also, the short borrow fee is elevated at 14.56%.

Here’s the other thing that makes BOWL a dangerous idea to short. Right now, analysts peg BOWL a unanimous strong buy with an $18 price target. If that wasn’t enough, sentiment among hedge funds for Bowlero is “very positive.” Arguably, it may be the most exciting idea among short-squeeze candidates.

CompoSecure (CMPO)

7 Potential Short-Squeeze Stocks Poised for Rapid Gains (6)

Source: Teerasak Ladnongkhun/Shutterstock.com

Diving into the high-risk, high-reward segment of potential short-squeeze stocks – as if the other ideas were somehow safe (they’re not) – CompoSecure (NASDAQ:CMPO) is a tough nut to crack. Specializing in secure payment card technologies and solutions, CompoSecure provides innovative security features that protect against counterfeiting and fraud in the payment card industry. It’s relevant but not according to investors.

In the past 52 weeks, CMPO lost almost 14% of its equity value. Since its public market debut, shares are down more than 47%. With the pain comes opportunistic skepticism. Per Fintel, CMPO’s short interest as a percentage of its float stands at 44.93%. Also, its short interest soars to 57.72 days to cover. The bears really “hate” CompoSecure but that also makes it vulnerable to a contrarian comeback.

Analysts view shares as a consensus moderate buy with a $10.50 price target, implying almost 103% growth potential. Now, it’s fair to say that CMPO’s hedge fund activity is neutral. However, TipRanks notes that insider trading activity is positive, which could make things very interesting.

Verrica Pharmaceuticals (VRCA)

7 Potential Short-Squeeze Stocks Poised for Rapid Gains (7)

Source: Gorodenkoff / Shutterstock.com

A dermatology therapeutics company, Verrica Pharmaceuticals (NASDAQ:VRCA) develops medications for skin diseases requiring medical interventions. Because the company addresses certain sensitive issues, it’s relevant because of the critical unmet needs. Sure enough, the market acknowledges Verrica’s importance to the biotechnology ecosystem, with shares up 28% in the trailing year. However, it’s been a wildly choppy ride.

Given the instability of VRCA, many traders have gone negative against the company. According to Fintel, VRCA’s short interest clocks in at 33.38% of its float. Also, the short-interest ratio is elevated at nearly 24 days to cover. To be fair, Gurufocus warns that Vericca suffers from six financial red flags. This includes an Altman Z-Score of 0.81 below parity, indicating distress.

However, analysts are not deterred by the negativity, rating VRCA a unanimous strong buy. As well, the average price target jumps to $12.25, implying over 107% upside potential. If you want to ramp up your risk-reward profile, Verrica is one of the potential short-squeeze stocks to consider.

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.comPublishing 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. Tweet him at @EnomotoMedia.

Growth Stocks

As a seasoned financial analyst and enthusiast with extensive experience in analyzing stock market trends and investment opportunities, I bring a wealth of knowledge and expertise to the table. Over the years, I've closely followed market dynamics, conducted in-depth research on various sectors, and provided actionable insights to investors seeking profitable opportunities.

Now, let's delve into the concepts mentioned in the article about potential short-squeeze stocks:

  1. Short Interest: This refers to the total number of shares of a particular stock that have been sold short by investors. Short interest is a key metric used to gauge investor sentiment and potential market direction.

  2. Short Interest Percentage of Float: This represents the percentage of a company's total available shares that are currently held short by investors. It indicates the extent to which investors are betting against a particular stock.

  3. Short Interest Ratio (Days to Cover): This metric calculates the number of trading days required for short sellers to cover their positions, based on the average daily trading volume. A higher short interest ratio suggests a potentially longer period for short sellers to buy back shares, which could lead to a short squeeze if the stock price rises.

  4. Short Squeeze: This occurs when a heavily shorted stock experiences a rapid increase in price, forcing short sellers to cover their positions by buying back shares. The buying pressure from short sellers closing their positions can further drive up the stock price, creating a feedback loop known as a short squeeze.

  5. Analyst Ratings: Analyst ratings provide insights into how Wall Street analysts perceive a stock's prospects. Ratings such as "buy," "hold," or "sell" are based on analysts' assessments of a company's fundamentals, industry trends, and growth potential.

  6. Hedge Fund Sentiment: This refers to the overall sentiment or positioning of hedge funds towards a particular stock. Positive hedge fund sentiment indicates that hedge funds are bullish on the stock, while negative sentiment suggests a bearish outlook.

  7. Float: The float represents the total number of shares of a company's stock that are available for trading by the public. It excludes shares held by insiders, employees, or controlling stakeholders.

  8. Insider Trading Activity: Insider trading activity refers to transactions involving a company's shares by its officers, directors, or other insiders. Monitoring insider trading can provide insights into insiders' confidence in the company's prospects.

By understanding these concepts and how they interplay with market dynamics, investors can better assess the potential for short-squeeze opportunities and make informed investment decisions.

7 Potential Short-Squeeze Stocks Poised for Rapid Gains (2024)


Top Articles
Latest Posts
Article information

Author: Carlyn Walter

Last Updated:

Views: 5721

Rating: 5 / 5 (70 voted)

Reviews: 85% of readers found this page helpful

Author information

Name: Carlyn Walter

Birthday: 1996-01-03

Address: Suite 452 40815 Denyse Extensions, Sengermouth, OR 42374

Phone: +8501809515404

Job: Manufacturing Technician

Hobby: Table tennis, Archery, Vacation, Metal detecting, Yo-yoing, Crocheting, Creative writing

Introduction: My name is Carlyn Walter, I am a lively, glamorous, healthy, clean, powerful, calm, combative person who loves writing and wants to share my knowledge and understanding with you.