Remember last summer (31 August) when we wrote about Fastly’s intention to acquire Signal Sciences for a whopping 27x revenues? In that blog post, we incorporated a Top 10 Stock Short Squeeze List that referenced GameStop (GME) as the second most likely stock to be squeezed. Do you know what happened, gentlemen, less than five months from the date of our blog post?
This is what happened, gentlemen: The biggest trading hysteria since that Tulip Bulb Mania over in Holland way back in 1636-37!
We chronicled the saga, for all to bear witness, just a few days ago in a post titled, ” ‘ “Hold, My Bully Boys, Hold” GameStop,’ Say Anons and Autists.“
Today we share herewith another Top 10 List of stock short squeeze candidates, but the analysis is based on different criteria from that used to compile our prior list.
Short Squeeze Candidates
Our prior list from last summer that included GameStop at number two on the list incorporated analysis about how much of a stock’s float (stock available to trade) was held short. GameStop, at the time, had about 75% of its float short. During the squeeze, GameStop had upwards of 140% of its float short. This is the illegal naked shorting aspect of that mania in which some hedge funds essentially went bust…until they got bailed out.
In this new list, we incorporate more arcane data, again provided by the smart and clever Ihor Dusaniwsky at S3 Partners, a financial/data software company.
You may reference the criteria in the next section, but for now let’s look at the ten stocks and how they have performed since S3 released its data on 14 December of last year.
After firing-up our trusty LibreOffice Calc spreadsheet and leveraging a bit of Python code, we put together this basic summary:
The Delta column clearly indicates, by green shading, that nine of the ten stocks have squeezed higher in less than two months, which is fast. Usually squeezes – big or otherwise – won’t manifest until about 6-12+ months after the alerts/analysis, generally speaking.
For now, take note of the last column (market capitalization). The three stocks that are under a billion dollars are highlighted because smaller capitalization stocks tend to be more volatile and vulnerable to squeezes.
Also, take note of the second to last column (52-week high %). One stock, Eastman Kodak Company (KODK), is only at 18.90% of its 52-week high, meaning there is a lot of upside for a squeeze for this relatively small-cap company. However, it has seen much lower prices in the last two years! Morningstar listed KODK’s short interest at about 24%, which is not a lot at the moment. Let’s see what happens to it and others on this list. Some, like Agora (API), which more than doubled since mid-December might actually crash (after its apparent squeeze). Who knows?
The point of this spreadsheet table is for interested parties to dig deeper into an analysis (float; short interest; determine the hedge funds involved and their change in position via SEC filings; etc.).
S3 Partners’ Short Analysis
Ihor Dusaniwsky shared a couple of perspectives regarding potential short squeezes in his blog post titled, appropriately enough, “Potential Short Squeezes” dated 14 December.
We based our Top 10 List on his Part I analysis focused on (1) mark-to-market losses and (2) high stock borrow costs. Here’s what he had to write:1 We encourage you to read his entire post and analysis.
Equity short squeezes can come from an accumulation of mark-to-market losses and\or high stock borrow costs which eat up an unacceptable amount of expected Alpha. Looking primarily at the mark-to-market losses I have combed over the nearly 14 thousand domestic stocks with short interest to see which stocks are short squeeze candidates. In my analysis I am looking at stocks with over $100 million of total short interest to include only stocks where the short covering from a squeeze can materially affect stock prices. Below are the top ten stocks by market cap with the largest weekly mark-to-market % losses, mark-to-market monthly % losses over -20% and stock loan borrow rates over 7% fee.Ihor Dusaniwsky, ShortSight.com (S3 Partners)
Now you. What are your thoughts about the Top 10 short squeeze stock candidates. Do you have an opinion on Kodak? What stocks on the list do you believe will experience a squeeze (or crash)?
Let us know on our LinkedIn page, subscribe to our blog alerts, or leave a comment below (note: submissions are delayed for a day or so to screen-out the robots).