It's not exactly a pillar of a sound, long-term investing strategy. But given the current (lousy) state of the market, perhaps trying to plug into a potential short squeeze might be more merited than usual. That is, if you pick the right stock.
The important caveats still apply, of course. You need to understand that these are speculative trades and that this really isn't something worth doing all the time. Indeed, if you chose not to take a swing on a short squeeze candidate at all, it wouldn't be a mistake. Sometimes you just have to deal with the market's bearish turbulence.
But if you're willing to get a little aggressive in light of slim pickings on the long-term front, here's a closer look at three of the better bets among the market's most shorted stocks.
Yes, this is the same Weber (WEBR) that makes outdoor grills and grilling accessories. The company went public in August 2021, capitalizing on the IPO craze underway at the time, despite the COVID-19 pandemic also underway then.
That last little detail appears to have caused big trouble, rewarding anyone who shorted the stock between then and now. Shares are currently trading at yet another record low, down more than 40% from their initial public offering price and more than 60% below their post-IPO surge. Those savvy speculators seem to have figured out that the timing and pricing of the public offering were both more than a little off.
Most of the sellers who have shorted this stock in the meantime, however, have arguably ignored all the price correcting that's been done in the meantime.
See, Weber is still a profitable company. It's also still expected to grow its top and bottom lines this year -- and next -- after bumping into a slight earnings headwind this year, with supply chain challenges rather than waning demand accounting for most of that slowdown. The at-home habits that were developed during and as a result of pandemic lockdowns are largely sticking around (grilling being one of those habits).
But how oversold is the stock? As of the latest tally, more than 13% of the company's outstanding shares are shorted, while nearly 29% of the float itself has been sold short.
2. Sirius XM Holdings
Sirius XM Holdings (SIRI -4.65%) is similarly shorted, with 28% of its float being bet against in the form of a short trade (as opposed to a long, owned trade rooted in the expectation that the stock will rise in the future). While only 5% of the total number of outstanding shares are shorted, most of this stock isn't free-trading, augmenting its potential for a short squeeze.
It's not too difficult to see why so many people are betting against this name. Technology coupled with the advent of broadband internet connectivity has introduced a bunch of alternative audio entertainment venues, ranging from radio stations' own websites to Alphabet's YouTube to self-hosted podcasts. Satellite radio seems like a has-been.
The thing is, Sirius XM's success has never really been about its anywhere/anytime satellite broadcasts. It's ultimately been about the personalities people are willing to pay to hear. Howard Stern, several exclusive sports talk shows (plus pro game radio broadcasts), and lots of lifestyle programming from celebrities such as Kevin Hart and Megyn Kelly make up just a small part of its lineup.
Though many of these shows are also available on an online streaming format, most of them are also exclusive to the Sirius XM brand. Consumers are willing to pay for them to get the quality of audio show they want, even though comparable programs are often available for free.
This is a big part of the reason Sirius XM Holdings has grown its top line every single quarter since the beginning of 2010, except for the second quarter of 2020. That, of course, is when the coronavirus was starting to spread, and most of those 2020 comps were also made unfairly tough due to 2019's acquisition of Pandora.
Finally, add solar panel maker SunPower (SPWR -8.91%) to your list of stocks ripe for a short squeeze rally.
The solar power industry has arguably never been stronger. The world installed a record-breaking 183 gigawatts of solar power production capacity last year, according to Bloomberg New Energy Finance (BNEF), eclipsing 2020's then-record of around 132 gigawatts despite logistics complications stemming from the pandemic. BNEF believes that figure will ratchet up to another record-breaking figure of 228 gigawatts this year, and given that one of the White House's current key agendas is clean energy, there's no reason to think that feat won't be achieved.
In fact, BNEF estimates each year's solar power installations will exceed the previous year's installs every year through 2030, when installation growth will start to accelerate again and reach 334 gigawatts worth of newly installed capacity that year alone.
In this growth vein, analysts believe SunPower will grow its top line to the tune of 18% this year as well as next, roughly doubling its per-share profits in both of those years.
This backdrop hasn't prevented SunPower shares from steadily losing ground since peaking at $57.52 in February 2021. The current price of just over $15 per share translates into a slide of more than 70%, exacerbated by the short sellers that have piled onto this falling stock.
With more than 10% of its outstanding stock and nearly 22% of the float now sold short despite the company's bright future, shares are more than a tad subject to a short-covering rally. Like Weber and Sirius XM, they just need the right nudge to get the ball rolling.