Short selling — the practice of selling borrowed shares first, then buying them back later to cover your bet — got a bad name during the financial crisis as speculators bet against stocks willy nilly and made a fortune as Wall Street fell apart.
But short sellers aren’t inherently bad for the market — and they certainly aren’t always right, even when they bet against a stock.
In fact, investors who go long on a highly shorted issue can benefit from a “short squeeze” as the bears who guessed wrong have to race in and buy shares to cover their bets. After all, if you sell a stock without owning it, you have to buy it back eventually … no matter how high it has soared.
If you’re on the right side of a short trade, it can be very good. But those who ignore the stocks that short sellers are targeting might be doing so at their peril.
Because while the bears aren’t always right, it’s worth noting what they think so you can make an informed decision.
Here are seven highly shorted stocks that are in the bears’ crosshairs right now, based on Yahoo Finance data as of July 15. Short interest is reported as a percentage of the “float,” or outstanding shares that are tradable when you back out restricted stock: