Looking for the next GameStop? These 10 stocks are the next most shorted names on the small-cap focused Russell 2000 index.
Reddit has sparked a frenzy in the market this week.
GameStop (NYSE: GME) shares surged as much as 270% on Monday. On Tuesday, the stock rose another 95%. And on Wednesday, GameStop shares jumped 157%. A week ago, this stock traded for less than $40 and shares now sit at $347.51 as of Wednesday’s close.
The wild move higher has even sparked the attention of President Joe Biden, his Treasury Secretary Janet Yellen, and the SEC, which said today that it is “actively monitoring” the volatility in options and equities amid the surge.
Retail investors have rapidly driven up GameStop’s shares, squeezing hedge funds with large short positions in the company, grabbing the attention of basically everyone with an eye on the market. But GameStop isn’t the only stock these retail investors have been pushing higher.
AMC Entertainment (NYSE: AMC) looked like it might take up the baton from GameStop today, ending the day up 301% on Wednesday. AMC has 24% of its float in short interest, while GameStop’s short interest stands at 138%.
BB Liquidating (OTC: BLIAQ)—the final remnant of the bankrupt video-rental business Blockbuster—too surged on Wednesday, with the penny stock gaining as much as 302%. That massive gain for an old-world relic of a company with just one store still left in Bend, Oregon.
“The spotlight has pivoted from Large Cap Tech/‘Retail Favorites,’ to a largely ignored corner of heavily shorted smaller cap stocks,” Barclays said in a note out Tuesday. “In a span of a month, retail trading has significantly impacted price action and sentiment in these heavily shorted names, cementing the dominance of retail option investors.”
So which stocks will be next?
On its face, short interest appears to be bad for a stock, given that it means investors have little faith in a company’s prospects. But short interest can also be a bullish sign for a stock as any positive news will force short sellers to buy the stock to cover their short bets.
In the current environment, Interactive Brokers chief strategist Steve Sosnick says short sellers need to watch their backs now.
“I believe there is a systemic targeting of highly shorted stocks,” Sosnick said.
In the S&P 500, the most shorted stocks include big names like American Airlines (NASDAQ: AAL) and ViacomCBS (NASDAQ: VIACA). But big names don’t appear to be the targets for now.
Looking at the small-cap focused Russell 2000 index, however, could give investors an idea of which stocks might be the next to rocket higher.
It’s no surprise GameStop is the most shorted stock in the Russell 2000. The other most shorted names in the index include struggling department store Dillard’s (NYSE: DDS), Ligand Pharmaceuticals (NASDAQ: LGND), Bed Bath & Beyond (NASDAQ: BBBY), National Beverage Corp. (NASDAQ: FIZZ), AMC Networks (NASDAQ: AMCX), Macerich Co (NYSE: MAC), Academy Sports & Outdoors (NASDAQ: ASO), SunPower (NASDAQ: SPWR), Tanger Factory Outlet Centers (NYSE: SKT) and Accelerate Diagnostics (NASDAQ: AXDX).
Many of these most-shorted names have already seen big moves this week with National Beverage, Accelerate Diagnostics, and Macerich delivering the biggest gains, adding 92%, 74%, and 59%, respectively, since last week.
For investors who can stomach another volatile GameStop-esque trade, these ten most-shorted names may be worth keeping an eye on. The rest of us can sit this wild trend out.