Dividend Stocks

7 Short-Squeeze Stocks Set for a May Rally

A practice designed for only the most daring traders, the best short-squeeze stocks to buy now could yield tremendous gains. To be sure, approaching this sector means staring at the possibility of severe losses in the face. Still, because of the extreme risks involved, the rewards could be massive.

To understand why, when bulls invest in a company, the risk is always that the security can go to zero. However, no upside price ceiling theoretically exists. Therefore, when bears take the opposite-side bet, they may incur unlimited liability. To avoid this prospect, they must cover their short positions by buying back the target security. Thus, a compelling short-squeeze stocks list generates plenty of attention.

Of course, you must also realize that when securities face downside pressure, there’s a reason for that. Usually, it’s not a good one. So, it’s always possible that short-squeeze stocks on Reddit or whatever social media platform can continue dropping. Such is the life of the contrarian. If that doesn’t bother you, you might be ready for these short-squeeze stocks today.

WRLD World Acceptance $112.58
EDIT Editas Medicine $9.64
CNK Cinemark Holdings $16.96
CHWY Chewy $32.50
BYND Beyond Meat $10.85
SKIN Beauty Health $10.44
TRUP Trupanion $24.04

World Acceptance (WRLD)

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To be 100% clear, I can go either way with World Acceptance (NASDAQ:WRLD), which provides consumers with personal loans. Naturally, with the Federal Reserve implementing a hawkish monetary policy – that is raising the benchmark interest rate to combat inflation – companies that issue loans should be suspect. Obviously, as borrowing costs increase, fewer people will want to borrow money.

At the same time, when the Fed raises rates, it also raises the prospect of a recession. And during economic hardships, people need loans. Therefore, it’s possible that WRLD may rank among the best short-squeeze stocks to buy now. According to data from Benzinga, WRLD features a short interest of 52.88% of its float. Also, its short-interest ratio stands at 10.9 days to cover. Both stats are elevated, especially the former.

Interestingly, WRLD already gained 73% of equity value on a year-to-date basis. However, the onset of a recession could draw cynical demand for World Acceptance. Thus, might belong on your short-squeeze stocks list.

Editas Medicine (EDIT)

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A clinical-stage biotechnology company, Editas Medicine (NASDAQ:EDIT) intrigued because of its therapies for rare diseases. Leveraging the CRISPR gene-editing innovation, Editas ranks among the most relevant and compelling short-squeeze stocks to buy now. At the same time, market performance has been choppy. Since the start of the year, EDIT gained over 10% of its equity value. However, in the trailing year, it’s down more than 15%.

Still, Editas makes a reasonable case for best short-squeeze stocks because of the possibility of medical breakthroughs. Just in the open market alone, biotech shares can skyrocket in the blink of an eye based on positive clinical data. With a short squeeze, the sky’s the limit.

Per Benzinga, EDIT’s short interest is 41.54% of its float. Also, its short interest ratio is 9 days to cover. While analysts peg EDIT as a consensus hold, their upside price target lands at $15.33. This implies over 64% upside potential. Therefore, you should keep it on your short-squeeze stocks list.

Cinemark (CNK)

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A popular cineplex operator, Cinemark (NYSE:CNK) naturally suffered significantly because of the Covid-19 crisis. While other business categories were able to adapt to the circumstances, Cinemark and its ilk at one point incurred a total loss of demand. Even now, with the pandemic basically over, a troubled consumer market poses concerns for Hollywood. Therefore, it’s not surprising to see CNK pop up as one of the best short-squeeze stocks.

Still, if a recession materializes, Cinemark may perform quite well. Essentially, the company may benefit from the escapism angle. Back during the Great Recession, Hollywood struggled. However, evidence indicates that it weathered the storm better than many other industries. Plus, you get great bang for the buck at the box office. According to Benzinga, CNK’s short interest hit 37.9% of its float. Also, its short interest ratio is a rather elevated 10.2 days to cover.

Notably, analysts peg CNK as a moderate buy. Their average price target lands at $19.20, implying nearly 14% upside potential. Thus, it might be one of the short-squeeze stocks to buy now.

Chewy (CHWY)

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An intriguing but also challenging enterprise, online pet products retailer Chewy (NYSE:CHWY) provides relevancy because let’s face it: Americans love their pets, perhaps a little too much. At the same time, this catch-call narrative hasn’t been too kind to CHWY so far this year. Since the January opener, CHWY stumbled by nearly 11%. Thus, it’s not a surprise to see it on a list of short-squeeze stocks today.

Adding to the skepticism, MarketWatch posted in late March this year that CHWY dipped as its underlying earnings release showed a shrinking customer count and no forecasted profit growth. However, the underlying pet products and services sector continues to impress with a $136.8 billion sales haul in 2022. Therefore, if you’re a contrarian, CHWY might rank among the best short-squeeze stocks to buy. Right now, CHWY’s short interest hits 36.32% of its float. Also, its short interest ratio is 5.7 days to cover, which isn’t completely remarkable but still elevated from normal levels.

Beyond Meat (BYND)

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Another enticing opportunity among the best short-squeeze stocks for contrarian investors, Beyond Meat (NASDAQ:BYND) initially enjoyed strong support. And why not? Consistently, consumer surveys indicate that more than half of millennials are willing to eat (or are eating already) plant-based foods. Unfortunately, the market doesn’t care. Since the January opener, BYND lost more than 13% of its equity value. In the past year, it’s down 56%.

I don’t want to sound cavalier about the bearish pressure facing BYND. Currently, plant-based meat lacks economies of scale. Therefore, the alternative industry can’t keep up with entrenched animal protein players. However, over time, this narrative might change. Possibly, this dynamic could carry Beyond Meat higher, assuming it can survive the present financial onslaught.

For now, BYND carries a short interest of 33.25% of its float. Its short-interest ratio is somewhat elevated at 7.8 days to cover. Just beware that it doesn’t get any love from Wall Street analysts, which rates BYND a moderate sell. It’s really your call but it might belong on the daredevil’s short-squeeze stocks list.

Beauty Health (SKIN)

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For forward-thinking contrarians, Beauty Health (NASDAQ:SKIN) might be worth a second look as one of the best short-squeeze stocks. On the surface, the beauty care specialist might seem too risky. For example, a recent article from The Wall Street Journal pointed out that the return to the office has stalled. Therefore, with millions of workers still operating remotely, the need for beauty products theoretically diminish.

Nevertheless, with rising layoffs, this circumstance might not endure indefinitely. As well, the WSJ early this year pointed out that the market for remote workers shrank. In other words, people might be forced to socialize with others again. And that might yield a cynical lift for SKIN.

It’s a tricky example of short-squeeze stocks to buy now, I won’t deny that. However, the stats intrigue me. Currently, SKIN’s short interest stands at 32.57% of its float. As well, its short-interest ratio hit double digits at 10.3 days to cover.

Trupanion (TRUP)

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With pet insurance company Trupanion (NASDAQ:TRUP) – which focuses on medical insurance coverage for cats and dogs – a disclaimer is required. If you’re looking for the best short-squeeze stocks to buy for extreme upside potential, TRUP could be it. On the same breadth, TRUP can easily put you into a poor house if you’re not careful. So please, trade responsibly.

Now, what’s enticing about Trupanion is the same broad thesis that supports Chewy. Americans not only love their pets but throughout the product and services spectrum, they’re opening their wallets. Also, millennials have become the top pet parents. Given young people’s general lack of social skills, animals represent better companions for them than humans.

On paper, TRUP features a short interest of 33.22%. Its short-interest ratio pings at 9.8 days to cover. While that sounds “great,” just keep in mind that TRUP hemorrhaged 54% YTD. In the trailing year, it’s down almost 68%. So, you’re taking a big risk here if you consider it one of the short-squeeze stocks to buy now.

On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.