Just like investors can position themselves in favour of a stock (long) , they can also take a stance against that stock (short). This post will examine the stocks in which investors have downward expectations.
Short Interest as % of Floating Rate. Source: Own elaboration based on Reuters data.
- American Airlines Group: This stock has been one of the most shorted since the beginning of the year. The liquidity struggles the company is facing are making many investors to bet against it.
- Discovery Inc: The stock remained very affected after a major shareholder sold its shares by the end of march. It dropped close to 50%
- Norwegian Cruise Line: The pandemic has not been the best time to come across for the cruise company. In fact, during March 2020, its stock dropped more than 85%.
- Gap Inc: qualified as a High Yield by the main rating agencies, the company has many issues, not only derived from the pandemic but also from the company´s own viability with decreasing sales and profitability concerns.
¿Might these stocks have an upward potential?
Short positions can suppose an upward potential for the stock because, in order to undo this short position, the stock should be bought, lobbying therefore its price upward.
At the beginning of the year, we all saw the Gamestop case, where large investment funds were against that stock. All of a sudden, a group of investors agreed upon making the price of the stock rise. Then, the “shorts” were forced to buy to undo their position, forcing the so called short squeeze.
¿Which are the least shorted stocks?
We could not end this post without mentioning the stocks with the fewest short positions. Perhaps, we will not be surprised by the names that appear on the list:
- Phillip Morris Group and Altria: the two largest tobacco companies in the world, characterized by having stable income and dividends.
- Apple: it is still one of the most popular names on Wall Street, and no one dares to take a stand against it.
- Microsoft: the tech giant has very few slanderers, as its sales and profit forecasts are in constant increase.
- Coca-Cola: the more than well-known company is characterized by the continuous cash flows generated with the sale of beverages.
Among others, we would highlight Johnson & Johnson, Mastercard, JP Morgan, UnitedHealth and Pepsi.