Big-time grocery chain Safeway (NYSE:SWY) is a boring and tough business. It sells foodstuffs at low margins, and most investors weren’t hot on the stock in 2012.
But an interesting combination of events led to an explosion in Safeway stock prices this February. At the same time a large group of short sellers were betting against the stock, it posted strong earnings that beat estimates nicely. Roughly one-third of outstanding shares were held short, which resulted in a big-time squeeze as traders abandoned ship and moved the stock higher.
Such short squeezes are hard to predict, but it’s worth calling out Safeway for the potential the longs can tap into once a short-side bet sours. Positive buzz over spinning off its gift-card operations also is a plus.