As much as we may recognize that short sellers perform a valuable service for the equities market, the concept of targeting short-squeeze stocks to buy just to penalize the pessimists carries cathartic value. Fundamentally, market bears operate like great white sharks. As loathsome and fearsome as these creatures may be, they eliminate weak or sick animals, thus benefitting the broader ecology.
Similarly, bearish traders identify publicly traded enterprises that supposedly have no business commanding the value they do. If proven right, the bears take down their targets, allowing retail investors to focus on truly viable names. Still, the concept of making money from other people’s failures seems morally wrong. As well, sharks eating “cute” animals disrupt our psyche. Thus, when bears lose out from short-squeeze stocks to buy, the bulls feel no remorse.
If you belong in that camp – or simply want to make a quick buck – going contrarian against the bears might work. Provided you can handle the extreme risks involved, below are the short-squeeze stocks to buy.
Relying exclusively on Benzinga’s most shorted stocks list, the first potential upside opportunity centers on Cemtrex (NASDAQ:CETX). According to its website, Cemtrex builds experience-focused technology products that change the ways we work, play, and live. Mainly, the company specializes in versatile security cameras along with access management systems. In the trailing year, CETX dropped almost 74% of equity value, thus inviting the bears.
Per data from Benzinga, CETX currently features a short interest of 173.22%, a staggering figure. Moreover, the short-interest ratio stands at 177.7 days to cover. For the pessimists, CETX rates as a particularly dangerous idea. As of this writing, Fintel reports that only 15,000 shares are available for shorting. Therefore, it’s quite possible that CETX ranks among the short-squeeze stocks to buy.
Also, a lone analyst from Dawson James pegs CETX as a buy, with a price target of $8. This implies potential upside of over 27%. Therefore, anybody considering taking a short position here will want to reconsider.
Headquartered in Santa Barbara, California, Sientra (NASDAQ:SIEN) is an augmentation specialist. Not to offend anyone’s sensibilities, I’m not sure it’s prudent to explain any further. Go take a look at the website (privately) if you need further clarification. In the trailing year, SIEN fell a staggering 93.5%, inherently attracting bearish traders.
While it made sense to place short wagers on SIEN in 2022 (thanks to the benefit of hindsight), moving forward, it might not be a smart bet. That’s because CETX presently features a short interest of 173.22%. Generally speaking, figures into double-digit territory warrant caution. With triple digits, you’re playing with fire. Moreover, the short-interest ratio stands at 58.1 days to cover.
At this moment, data from Fintel reveals that only 7,000 shares exist that can be used for shorting. Technically speaking, the narrative might favor the bulls on this one, making it one of the short-squeeze stocks to buy.
Calling Tampa Bay, Florida home, Oragenics (NYSEAMERICAN:OGEN) is a biotechnology firm. Specifically, the company focuses on developing an intranasal vaccine for the SARS-CoV-2 virus to prevent Covid-19. Given that one-in-four adults have a strong fear of needles, Oragenics commands fundamental relevance. However, the market begs to differ, sending OGEN down nearly 75% in the trailing year.
Of course, with such a high magnitude of red ink, the bears looked to the biotech as a quick-buck mechanism. Right now, OGEN carries a short interest of 85.57% with a short interest ratio of 122.3 days to cover. Currently, Fintel notes that 40,000 shares of Oragenics are available for shorting. While a seemingly strong number, note that seven days ago, this figure stood at 3 million.
To be sure, OGEN still tempts the bears. Since the start of this year’s January opener, shares slipped over 11%. However, Oragenics posted strong free cash flow and book growth rates in the past three years. Thus, it could be one of the short-squeeze stocks to buy, to the detriment of the bears.
Sitio Royalties (STR)
Based in Denver, Colorado, Sitio Royalties (NYSE:STR) presents an odd case for short-squeeze stocks to buy. Per its website, Sitio focuses on investing in mineral and royalty interests in the Permian and other productive U.S. oil basins. Fundamentally, this approach should be appealing to investors as oil demand may rise based on geopolitical flashpoints and China’s reopening.
Sure enough, the market approves this thesis, sending STR up almost 39% in the trailing year. However, it’s possible that the bears believe too much good news is baked into the share price. Per Benzinga, Sitio’s short interest pings at 55.75%. Also, its short-interest ratio stands at 11.4 days to cover.
Nevertheless, other data points suggest that the bears will be absorbing serious risks betting against STR. Currently, Wall Street analysts rate Sitio as a consensus (and unanimous) strong buy. Also, their average price target hit $35, implying an upside potential of nearly 27%. Thus, STR could easily be one of the short-squeeze stocks to buy.
Warby Parker (WRBY)
Specializing in the retail of discount eyewear and contact lenses, Warby Parker (NYSE:WRBY) commands a relevant long-term narrative. Just to warn you, it’s terribly cynical. However, the fact of the matter is that by 2050, projections call for nearly half the world to have some degree of nearsightedness. Therefore, as long as Warby Parker can keep the lights on, it enjoys a massive total addressable market.
Unfortunately for WRBY stakeholders, shares stumbled 52% in the trailing year, thus attracting the bears. As a consequence of WRBY’s underperformance, its short interest hit 52.72% currently. As well, its short-interest ratio pings at 12.7 days to cover. According to Fintel, only 55,000 shares are available for shorting. In contrast, Warby Parker’s float stands at 65.27 million shares.
Also, Wall Street analysts rate WRBY as a consensus moderate buy. In addition, their average price target of $19.20 implies upside potential of nearly 15%. Therefore, it could very well be one of the short-squeeze stocks to buy.
Clear Secure (YOU)
A somewhat controversial firm, Clear Secure (NYSE:YOU) is a tech firm that specializes in biometrics. Specifically, its system facilitates quick travel document verification, enabling Clear Secure to pay members a more convenient experience at the airport. While it might be the bane of non-member frequent flyers, here’s the deal: business travel may make a big comeback this year.
Naturally, this should put YOU in the driver’s seat. And that’s exactly the case. In the trailing year, YOU gained over 39% of equity value. And since the January opener, it’s up over 11%. However, since its public market debut, YOU fell over 35%. Currently, Clear Secure’s short interest stands at 51.46%. As well, its short-interest ratio hit 12.4 days to cover.
Although Wall Street pegs YOU as a consensus hold, TipRanks notes that sentiment among hedge funds rate as positive. Considering that these institutional players often represent smart money, YOU might be one of the short-squeeze stocks to buy.
Beauty Health (SKIN)
Headquartered in Long Beach, California, Beauty Health (NASDAQ:SKIN) is a global category-creating company focused on delivering beauty health experiences by reinventing its consumer’s relationship with their skin, their bodies, and their self-confidence. With 90% of companies likely requiring their employees to return to the office, the incentive to look good may spike dramatically.
Apparently, many in the market believe in this thesis, with SKIN shares gaining over 12% since its public market debut. As well, since the Jan. opener, SKIN gained a very robust 24.4%. Still, the bears must believe Beauty Health has run too far, too fast. Presently, its short ratio pings at nearly 44% while its short interest ratio stands at 13.6 days to cover.
Also, while it’s a little-known enterprise, Wall Street analysts rate SKIN as a consensus moderate buy. Even better, their average price target stands at $17.17, implying nearly 50% upside potential. Yet again, this may be one of the short-squeeze stocks to buy.
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.