Finding the next Gamestop (NYSE:GME) stock and hoping to make big profits in a very short time is an interesting yet very risky strategy. If something is well-known in the market, no returns can be guaranteed. But this does not mean that traders can’t search for the next GME stock — the next name that could quickly bounce off its lows.
Before I go any further, though, I must highlight the fact that this kind of trading decision is too risky for most investors. Stocks can spike and plummet fast. However, if you’re okay with that risk, look at stocks with a high percentage of their floated shares short. That could mean that chances of a squeeze are high.
So, here are three stocks that may have a short squeeze soon.
Clovis Oncology (CLVS)
With a market capitalization of $740.6 million, Clovis Oncology belongs in the biotechnology industry and has the potential to be the next GME. Biotech stocks can be extremely volatile. That’s because news related to clinical trials of their products can often cause spikes or drops in price.
Right now, this stock is near its 52-week high of $11.63. And so far in 2021, it has performed very well. Bouncing off a low price of $4.81, CLVS stock gained about 115% to 10.34 on Feb. 8 before readjusting to the $7 level on Feb. 17.
Finally, the company increased its revenue to $143 million in 2019, up 50% YOY from $95 million in 2018. However, Clovis is still unprofitable. That probably explains this short-selling pressure.
Naked Brand Group (NAKD)
Naked Brand Group is a designer, retailer and distributor of women’s and men’s intimate apparel as well as women’s swimwear. For much of 2020, NAKD stock’s price was under $1 and that meant it was at risk of getting delisted by the Nasdaq Exchange. One of the rules of the exchange states the following:
“Nasdaq may, in its discretion, require an issuer to maintain a bid price of at least $1.00 per share for a period in excess of ten consecutive business days, but generally no more than 20 consecutive business days, before determining that the issuer has demonstrated an ability to maintain long-term compliance”
However, something interesting happened in late January of 2021. The stock price surged from about 40 cents per share to over $1 per share, reaching a high of $3.4o on Jan. 28. But this does not mean that the delisting danger has passed. NAKD stock has not yet closed above $1 per share for 10 consecutive days, with Feb. 17 being the tenth day in its streak.
The company has also been unprofitable for quite some time. So, there are several factors lining it up to be the next GME.
Last on this list of “the next GME stocks,” Precigen is a biotech company that’s focused on developing the next generation of gene and cellular therapies in the United States. This is both a very exciting as well as risky business.
With a market capitalization of $1.6 billion, Precigen is almost a mid-cap stock. But this does not mean that it can’t be subject to a potential short-squeeze.
This year has already been too volatile for PGEN stock. For one, its price fell from almost $11 per share to less than $8 per share. Plus, in the summer of 2020, the stock fell as low as $2.15 per share.
Yet, this pick has rebounded impressively from that level to its current price. The company also recently announced a public offering of common stock. According to Yahoo! Finance, “Precigen sold 17,250,000 shares of its common stock at a public offering price of $7.50 per share, including the exercise in full by the underwriters of their option to purchase an additional 2,250,000 shares of common stock.”
In theory, this stock dilution should be negative news for PGEN. But that was not the case. In fact, the stock is currently about 4% higher than that offering price, now sitting at the $7.80 level.
So, what do this stock and the other two picks mentioned above have in common? In two words, net losses. Back in 2019, Precigen had a loss of $322 million. In 2018, its loss was over $509 million.
Short Squeezes Are Nothing New for Stock Trading
Short squeezes and short selling are not new trading decisions in the stock market. Moreover, recent news from Citigroup (NYSE:C) is supportive of a potential new short squeeze in some stocks. The firm noted:
“A squeeze of short positions looks set todrive a further rally in the S&P 500 index […] Nearly $10 billion worth of shorts were unwound last week […] the largest rate since April, and $21 billionshorts still remain and are in loss […] There is potential for further short squeezes supportingmarket gains for another week or two given the size of theremaining short base.”
For all these three stocks, the chances of becoming the next GME are high. And from a fundamental analysis, this rise now would be hard to explain. Most likely, the potential jump and short-squeeze of these names would be based on momentum — maybe from social media, too.
Who says the stock market is always rational? Many times, it’s all about price and not valuation.
On the date of publication, Stavros Georgiadis, CFA, did not have (either directly or indirectly) any positions in the securities mentioned in this article.