Short-squeeze stocks represent one of the boldest forms of contrarianism available. Simply put, it’s a showdown between the bears that are attempting to profit from the downturn of a public enterprise. In their minds, by eliminating weak players from the market, it improves Wall Street’s “gene pool,” if you will. On the other end, the bulls can play the savior role.
What makes short-squeeze stocks so compelling, though, is the incentivization profile. On the pessimistic side, speculators make their money pocketing the difference between the borrowed securities selling price versus the subsequent buy-back price. If the latter is lower than the former, the trader picks up a profit. However, if the latter is higher, than the speculator incurs a loss.
Now, unlike other types of market losses, the red ink on a short trade is uncapped. That’s because there’s no limit to how high a security can rise. Therefore, a panic to cover bearish positions (by buying to close) can yield a dramatic lift in the share price, called a short squeeze. With that in mind, below are short-squeeze stocks to consider.
Kadant (KAI)
Operating in the specialty industrial machinery sector, Kadant (NYSE:KAI) supplies various technologies and engineered systems worldwide. Primarily, the company focuses on fluid-handling systems and equipment, such as rotary joints and syphons. It also features other relevancies, including innovations in industrial automation and control. Still, KAI has fluctuated in market value.
Nevertheless, investors will want to keep close tabs on Kadant. According to Fintel, KAI stock carries a short interest of 12.32% of its float. That’s elevated but not intensely remarkable. However, the equity unit’s short-interest ratio stands at nearly 33 days to cover. That’s the number of trading sessions it would take for the bears to close out their short exposure.
If a panic materializes, the bears will be anxious to seal off their vulnerability. They’re even more motivated to do this with Kadant, noting that KAI stock has gained 13% in the trailing month. In addition, the company is projected to see revenue growth of nearly 11% to $1.06 billion by year’s end. It’s one of the short-squeeze stocks to consider.
AirSculpt Technologies (AIRS)
Operating in the medical care facilities industry, AirSculpt Technologies (NASDAQ:AIRS) along with its subsidiaries provides body contouring procedure services. It offers its namesake solution, which is a next-generation body contouring protocol that removes unwanted fat and tightens skin. Best of all, the procedure is minimally invasive.
Still, many investors are skeptical about AIRS stock. Since the start of the year, shares tumbled more than 36%. As a result, the short interest of AirSculpt comes in at 16.26% of its float. However, the short-interest ratio is truly remarkable, standing at almost 56 days to cover. We’re basically talking business days here so that’s a lengthy period of vulnerability for the bears.
If AIRS stock starts shooting higher for whatever reason, a panic could easily materialize. It’s worth pointing out that in the business week ended July 12, the equity gained more than 16%. In addition, analysts project that AirSculpt can post earnings per share of 24 cents this year. That’s up from last year’s loss of 8 cents. It’s a candidate for short-squeeze stocks.
Trupanion (TRUP)
Falling under the specialty insurance segment, Trupanion (NASDAQ:TRUP) in my opinion represents a clear-cut case for short-squeeze stocks. With its subsidiaries, Trupanion provides medical insurance for cats and dogs on a monthly subscription basis. What’s enticing here is the fundamental catalyst: Americans (and citizens of other countries) love their pets.
It’s too bad that Wall Street doesn’t love TRUP stock. Since the beginning of this year, shares gained less than 2%. Over the past five years, it went nowhere if you had held throughout the entire period: TRUP lost a bit more than 9%. Still, what’s intriguing here is that the equity’s short interest stands at nearly 33% of its float. Further, the short-interest ratio is 31.41 days to cover.
If you’re an extreme contrarian, these figures may have you drooling. What you have is an extremely high short interest along with a blisteringly hot short ratio. You’ve basically got the bears boxed in if the position moves against them. Analysts are calling for revenue to expand by 13.7% to $1.26 billion in fiscal 2024.
Westrock Coffee (WEST)
Falling under the consumer defensive space, Westrock Coffee (NASDAQ:WEST) operates in the packaged foods industry. Per its public profile, Westrock is an integrated coffee, tea, flavors, extracts and ingredients provider. It mainly serves the U.S. though it also covers other international markets. With the growing demand for coffee worldwide, WEST stock should be intriguing for many investors.
Unfortunately, Wall Street doesn’t have much love for Westrock. Since the beginning of January, shares lost about 2% of equity value. In the past 52 weeks, they’re down 8%. Those aren’t great statistics. At the same time, contrarian investors should consider the bearish profile. Short interest stands at a whopping 54.85%. That’s extreme and then some. Also, the short ratio hits 33.27 days to cover.
Again, what we have here is a situation where the bears are locked in. If the position moves against them, a big panic can materialize. After all, 33 business days is a long time. Plus, experts project 9.4% sales growth to $945.67 million this year. It’s one of the short-squeeze stocks to consider.
Mondee Holdings (MOND)
Operating in the consumer cyclical sector, Mondee Holdings (NASDAQ:MOND) specifically covers the travel services realm. Per its corporate profile, Mondee operates as a travel technology firm for the leisure travel space. Primarily, the company focuses on the sale of airline tickets through its platform. Thanks to people prioritizing their vacation time post-pandemic, MOND stock should be intriguing.
However, the market has had a tough time deciphering what the underlying business is all about. On a year-to-date basis, MOND incurred a loss of more than 3%. Further, the trading action has been incredibly choppy throughout 2024 so far. Still, MOND could attract contrarians with its short interest of just under 21% of its float. Further, the short interest ratio stands at 42.58 days to cover.
As with so many of the other short-squeeze stocks on this list, an upside panic can lead to more upside as the bears rush to cover their short positions. Experts also see Mondee hitting $255.09 million in sales for fiscal 2024, implying 14.8% growth from last year.
scPharmaceuticals (SCPH)
Falling under the biotechnology space, scPharmaceuticals (NASDAQ:SCPH) engages in the development and commercialization of various pharmaceutical products. Its lead product candidate is Furoscix, which aims to treat congestion due to fluid overload in adults with chronic heart failure and kidney disease. Given the rise of incidences of chronic disease, scPharmaceuticals should “benefit” (for lack of a better word) from this dynamic.
However, the market seems to have other ideas. Since the start of the year, SCPH stock incurred a loss of more than 29%. In the past 52 weeks, it’s down almost 47%. Still, this could be a case of bad news being good news, especially for contrarians. The short interest of SCPH stands at 36% of its float. Also, the short-interest ratio clocks in at 50.5 days to cover.
If shares start flying higher, the bears could be locked in. Therefore, the contrarian bulls are possibly licking their lips. Analysts believe that the biotech could post sales of $39.34 million this year. If so, that would imply a growth rate of 189.4%. This is one of the more tempting short-squeeze stocks.
Verrica Pharmaceuticals (VRCA)
Ending this list with another healthcare-related entity, Verrica Pharmaceuticals (NASDAQ:VRCA) is a clinical-stage dermatology therapeutics firm. It develops medications for the treatment of skin diseases. Right now, it features a therapeutic called Ycanth (VP-102), which is in Phase 3 trials for the treatment of common warts. Given the sensitive needs to address such skin conditions, Verrica should be a top player.
Sure enough, VRCA stock has gained over 25% of market value since the start of the year. However, it’s been a choppy ride. Those who got in during this year’s highs are still underwater, implying lingering pessimism. This dynamic explains the high short interest of 26%. Not only that, VRCA’s short interest ratio lands at 32.83 days to cover.
However, if shares start swinging higher for whatever reason, the bears would likely find themselves in trouble. It takes a while to unwind a short ratio of 33 days. Further, analysts anticipate massive growth in the coming years. Fiscal 2024 sales could hit $24.71 million, up 382.2%. And fiscal 2025 may see revenue up at $70.3 million. It’s one of the short-squeeze stocks to keep on your radar.
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.
