There are dozens of ways to pick stocks, but few have been as unconventional — or as successful — as the coordinated short-squeeze being deployed by Reddit’s army of day traders. Now, Wall Street is scanning for which of the market’s most-hated shares could be targeted next.
It’s simple, though not necessarily intuitive: identify a company with huge levels of short interest, and pile in. GameStop Corp. — which entered the week with 139% of its available shares borrowed and sold short, according to data from S3 Partners — served as a proof of concept. The video-game retailer has soared nearly 700% in five days forcing the likes of Citron Research and Melvin Capital to abandon their bearish positions.
Now, analysts are casting a wary eye toward the stocks that could be next. The list of potential targets includes Vir Biotechnology Inc. and SunPower Corp. which have short-interest levels above 30% of their floating shares, according to S3 data. Meanwhile, D.A. Davidson analysts wrote Wednesday that companies such as Fastly Inc. and J2 Global Inc. could come into the crosshairs, given their high levels of short interest.
“You don’t see revolutions happening, they just occur, and I think we’re in a moment like that in financial history,” Bob Sloan, S3 founder, said in a phone interview. “The hard thing to measure is how much buying power is in these bulletin boards.”
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