Short-squeezes have been making headlines in stock trading as an increasingly popular phenomenon. A short squeeze occurs when investors who have bet against a company’s stock (by “shorting” it) are forced to buy back their shares to cut their losses. This sudden buying activity can lead to a surge in the stock’s price, causing a chain reaction of buying among other investors and a significant price increase. Thus, various short-squeeze stocks can see outsized gains in short order.
That said, like all companies, not all short-squeeze stocks can be grouped together. Some are heavily shorted for a good reason. Thus, investors take on significant risks with investing in such companies.
Speculating isn’t what I do. Accordingly, these stocks are outside of my purview and stocks I can’t and won’t own. That said, there are plenty of different investor types out there. For those looking to speculate on short-squeeze stocks with serious catalysts, here are three that have made my radar of late.
Party City (PRTY)
First on this list of short-squeeze stocks is Party City (OTCMKTS:PRTY). Indeed, PRTY stock has disappointed investors significantly, being one of the year’s worst performers until today. Over the past 12 months, the stock has declined by more than 95%, with a peak-to-trough decrease of over 60% in 2023 alone. Despite this, the stock has shown signs of volatile near-term rallies, surging on a number of occasions over the past year.
A retailer that’s filed for bankruptcy, PRTY stock is now trading on the over-the-counter exchange at only 7 cents per share. To put that into context, this stock was above $3 per share a year ago. And this stock was trading above the $15 level for the better part of the past decade.
The party is over for the company. And while there have been previous rallies in this stock, it’s clear that most investors have exited the name.
However, as we’ve seen with other stocks embroiled in bankruptcy proceedings, anything can happen. A stock trading at levels this low is highly risky. However, penny stock traders and speculators looking to pick up a potential momentum-driven mover may consider this stock on any positive momentum.
Right now, PRTY stock looks like a falling knife going to zero (it’s almost there). But who knows what can happen? Speculators may want to keep this stock on the radar for now.
Various trading sessions earlier this year saw exceptional momentum build for certain growth stocks. The release of a CPI report indicating a decline in inflation has encouraged investors to take a riskier approach to equities. This has resulted in impressive daily gains for companies such as Arrival (NASDAQ:ARVL). However, it is highly probable that the stock’s surge of over 320% from mid-December to January is unlikely to be repeated. That’s what the market is pricing in, at least.
That said, this week brings with it plenty of catalysts for the market to digest. Economic reports, Fed speak, and other catalysts will materialize throughout the week. A company like Arrival could see significant buying interest if the market thinks it’s time to take risks.
The company’s elevated short-interest ratio, currently around 13%, could portend well for those hoping for a short squeeze. While this isn’t the most highly-shorted stock out there, it’s on the list. Thus, it’s something stock speculators may want to keep on the radar.
This EV startup has plenty of problems, and there’s a ton of hair on this stock. However, for some, this company could present a high-upside bet if momentum picks up. Right now, that’s a big if, but anything’s possible.
As meme stocks witness increasing interest among investors today, traders are again gaining popularity in trading shunned names. Moreover, some other companies, which may not be typically associated with the meme trade, are also experiencing surges. One such company in the spotlight is Cassava Sciences (NASDAQ:SAVA).
The primary reason for this company’s previous stock price surges is related, once again, to the assumption that the company’s high short interest could lead to a short-term rally. In the previous year, the management of Cassava Sciences cautioned about a “short and distorted” campaign aimed at the company. Consequently, this stock has now come under the notice of many traders in the r/WallStreetBets community and other places.
The biotech industry has experienced a significant decrease in the stock market in the last year. As a result, investors prioritizing value-based growth may see this area as a favorable opportunity, considering the considerable declines across the board in 2022. However, Cassava Sciences has performed relatively well this year despite the sector’s difficulties. Even after some ups and downs, the company has only experienced a decline of less than 25% in the last year. This is alright compared to the declines seen by many other popular growth stocks.
However, like other struggling biotech stocks, Cassava needs help achieving profitability. The current market focuses on profits, and investors are looking for a return on their invested capital. Therefore, if the bear market persists, both Cassava and other meme stocks may experience further decline.
On the date of publication, Chris MacDonald 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.