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Top Heavily-Shorted Stocks You Can Buy Now
- Bostonian 6y agoMy reading of the academic finance research is that heavily-shorted stocks underperform on average. Short-sellers do not target stocks at random. There is a 2013 paper "Short interest, returns, and fundamentals" https://risk.edhec.edu/sites/risk/files/edhec-working-paper-short-interest-returns-and-fundamentals-f_1394097189051.pdf https://risk.edhec.edu/sites/risk/files/edhec-working-paper-... Abstract: We show that short interest predicts stock returns because short sellers are able to anticipate bad news, negative earnings surprises, and downward revisions in analyst earnings forecasts. They appear to have information about these events several months before they become public. Most importantly, the cross-sectional relation between short interest and future stock returns vanishes when controlling for short sellers’ information about future fundamental news. Thus, short sellers contribute, in a significant manner, to price discovery about firm fundamentals, but the source of their information remains an open question.
- jfengel 6y agoAs investing fads go, at least "it's got a high short interest, maybe it will short squeeze" has the advantage that all you can lose is what you put in. So many investing fads use some kind of leverage -- and I'm sure sooner or later people will be trying to squeeze shorts on margin. The squeeze is a specific circumstance that lets a few people profit substantially at the expense of somebody caught with their pants down. But as you say, most shorts happen for a reason, and represent somebody's honest judgment about the real value of a stock. They may be wrong, but anybody learning only the lesson that a heavily shorted stock necessarily represents a chance to make a lot of money fast is probably going to learn a very hard lesson.
- jdmoreira 6y agoWhy are Analog Devices and Maxim on this list?