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The Short Squeeze Could Be Ending for These 3 Stocks

By Matthew Frankel, CFP® - Updated Jan 29, 2021 at 3:08PM

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These three mall stocks spiked higher earlier in the week, but seem to be cooling off.

What happened

Some of the higher-profile stocks that have been experiencing short squeezes this week -- specifically GameStop and AMC Entertainment Holdings -- were sharply higher on Friday.

However, some of the mall operators that were also caught in the short-squeeze action are not. Mall real estate investment trusts, or REITs, Seritage Growth Properties (SRG -1.48%), Macerich (MAC -3.17%), and Pennsylvania Real Estate Investment Trust (PEI -2.09%) were lower after spiking earlier in the week. At approximately 2:30 p.m. EST, the three mall REITs were down by 17%, 13%, and 10%, respectively.

Shopper with bags walking toward a mall entrance.

Image source: Getty Images.

So what

These three mall REITs all have elevated levels of short interest. As of Jan. 15, 38.6% of Seritage's available shares for trading (the float) were sold short. For Macerich, the short interest was an even higher 56.9%. And while Pennsylvania Real Estate Investment Trust's (PREIT) short interest is significantly lower at 16.8%, it's still much higher than the short interest in the average company -- especially when you consider PREIT just recently emerged from bankruptcy, which likely caused many short-sellers to cover. As a general rule, I consider any level of short interest in the double digits as being a high level of pessimism in the stock. 

If you've been following the GameStop and AMC news, you're aware that there has been a volatile short squeeze movement going on. And it didn't only affect the headline stocks like those: Most stocks with elevated levels of short interest experienced similar price action and volatility as well.

Macerich had an especially interesting development today. When the stock surged this week, its largest investor -- the Ontario Teachers' Pension Plan -- decided to sell all of its 24.56 million shares of the mall operator at an average price of $20.25 each, nearly 23% more than where it currently trades. This is a big deal, as the stake represented 16.4% ownership of Macerich stock and isn't exactly a big vote of confidence that the higher stock price was justified by anything besides market volatility.

Interestingly, one of the other mall REITs that was short squeezed this week, Tanger Factory Outlet Centers (SKT -4.10%), wasn't moving sharply lower on Friday, with shares down by just over 1%.

Now what

These mall REITs are all still sharply higher than where they ended last week. Seritage is still 27% higher than where it closed last Friday, while Macerich and Pennsylvania Real Estate Investment Trust are still up by 18% and 10%. So, while it looks like the short squeeze in these stocks is over (at least for the time being), it's important to note that all of the gains haven't been erased.

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Stocks Mentioned

The Macerich Company Stock Quote
The Macerich Company
MAC
$11.46 (-3.17%) $0.38
Tanger Factory Outlet Centers, Inc. Stock Quote
Tanger Factory Outlet Centers, Inc.
SKT
$16.10 (-4.10%) $0.69
Pennsylvania Real Estate Investment Trust Stock Quote
Pennsylvania Real Estate Investment Trust
PEI
$0.45 (-2.09%) $0.01
Seritage Growth Properties Stock Quote
Seritage Growth Properties
SRG
$7.63 (-1.48%) $0.12

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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