Move over, Robinhood. Reddit's driving the market these days. GameStop is the name that turned heads with the mother of all short squeeze and gamma squeeze rallies, but the video game retailer is a bad long-term bet for members of the WallStreetBets subreddit group. Sales are a little more than half of what they were when it peaked eight years ago, and there's no legitimate catalyst to reverse the negative trajectory.
Investors can cash in on stocks when a lot of folks are betting against the investments, but this only works on a sustainable basis when we're talking about growing companies riding promising trends. I screened for stocks where at least 25% of their outstanding float is currently being sold short on Finviz. There are a lot of stinkers in that list, but three I like are BurgerFi (NASDAQ: BFI) (OPES), Beyond Meat (BYND 9.15%), and HUYA (HUYA -3.64%). Let's play.
This isn't an easy time to be championing a restaurant chain. Indoor dining is off the menu in most markets, and folks who are trying to save money in a recession have every reason to eat at home more. This brings us to BurgerFi, which picked an unfortunate time to hit the market through a combination with a special purpose acquisition company this past summer.
You may be familiar with the BurgerFi concept, a rising player in the "better burger" game that has proven to be one of the more resilient trends in fast casual. There are roughly 125 mostly franchisee-operated locations across the country. BurgerFi is doing a much better job than its peers in getting back on track.
Comps were negative at BurgerFi through 2020, but the trend has been improving markedly since mid-March:
- First quarter: negative 11.8%
- Second quarter: negative 33.7%
- Third quarter: negative 9.2%
- Fourth quarter: negative 2.9%
It's impressive that store-level performance is nearly where it was a year ago when it was business as usual. BurgerFi's warm embrace of third-party delivery apps is helping, as digital sales more than doubled in each of three months in its latest quarter.
The comparisons will be easy in 2021 after the pandemic-topped 2020, but franchisees are also storming back to the concept. After opening just 11 new restaurants last year BurgerFi is eyeing 30 to 35 new openings this year and is aiming for 40 to 45 additions in 2022. We're talking about going from 125 units now to potentially more than 200 restaurants by the end of next year.
The next time you find yourself at a BurgerFi and not feeling as carnivorous as your fellow diners you can always order one of two burgers made with Beyond Meat as the patty. Impossible and Beyond have become the runaway leaders in plant-based proteins that convey the texture and, to some degree, the taste of a regular beef patty.
There are plenty of bears who feel investors shouldn't be sinking their teeth into Beyond Meat's stock. More than 35% of Beyond Meat's public float of 43 million shares is currently shorted, and that's proven to be a big mistake with the shares climbing 35% so far in 2021. It entered into a partnership with PepsiCo last week to develop plant-based snacks. McDonald's keeps ramping up the overseas rollout of the McPlant burger it developed with Beyond.
Revenue more than tripled in 2019, and then the pandemic snuffed out its momentum on the foodservice end. It's holding up nicely on the retail level, and analysts see top-line growth rising nearly 50% this year.
Finally, we fly to the other end of the world to see the Chinese gamers are as smitten with esports as we are. HUYA is the leading streaming platform for gamer videos. Watching folks play popular games is a pretty big draw. HUYA has been able to grow its Huya Live audience by 18% to 172.9 million monthly average users.
Revenue rose 24% in its latest quarter, and adjusted net income soared 75%. HUYA is also in the process of acquiring China's second largest player, a corporate combo that will command 80% of the booming market. Despite the strong growth and its market dominance the boo birds are out in full force with 36% of HUYA's float in the hands of short sellers. That's a big mistake. HUYA is here to play, and right now it's winning.