GameStop Again: Other Stocks with Continued Short Interest
The stock market has been hit with an unusual story in recent weeks, one that has both amused and frustrated. For those unaware, a group of mostly young investors have come together to push GameStop’s stock value up. Wall Street will be keen to see the back of this development, but there’s been no sign of this abating.
Even Elon Musk and Chamath Palihapitya have talked about it, which further sent the stock price up. In total, the stock has gained about 650% since the start of the year. Obviously, that wasn’t what Wall Street was betting on.
It is now up for several sessions straight, with Reddit’s WallStreetBets doing the bulk of the work. There is no sign yet that it will slow down, though that will have to happen eventually. However, what’s really interesting is how the market is reacting — and that other stocks are doing the same.
Wall Street Growing Aggravated
Naturally, the movement has enraged Wall Street investors who remain bearish on GameStop. The company has suffered in the past few years as video game sales veer towards digital copies. A series of less-than-flattering incidents have also affected the company’s stock value.
Short sellers on Gamestop have lost a whopping $5 billion, as Redditors take the fight to Wall Street. To its credit, the company is working on changing its business model, which recent events will put more pressure on.
Hedge funds and other professional investors are still sticking by their judgement, even as money bleeds out. The number of shorts on the stock have jumped by 1.53 million in the last 30 days alone. One hedge fund even lost 30% of its assets under management.
Wall Street is more or less holding its ground — it’s not the money that’s at the center of attention here. It’s the fact that small retail investors are taking the fight to the big names.
And it looks like GameStop may not be the only one to gain despite being shorted on. The most heavily shorted stocks are all gaining YTD, and there might be more drama yet.
Will Other Stocks See Similar Attention?
GameStop’s stock rise is indicative of a larger trend in the market that’s been coming to a boil. The popularity of Robinhood and the pandemic have spurred millennials to put their disposable income in equity. These investors are a savvy bunch — and certainly have a devil may care attitude about investing.
Currently, Bed, Bath and Beyond, AMC Networks, and Macy’s are seeing heavy short selling activity as well. Though not quite as much as GameStop, the 30%–70% short interest is still a feast for Redditors. Bear in mind that, as an investor yourself, the long-term prospects of these companies are not doom and gloom.
Data from IBD and S&P Global Market Intelligence shows that stocks have gone up despite increased short interest. All of these, of which Gamespot is at the top, are seeing gains. Bed, Bath & Beyond and Logan Pharmaceuticals follow, and they’re both 72.7% and 56.9% up YTD.
On an average, those stocks are up 73% YTD, and some, including retail and real estate, even grew during 2020. AMC Networks is up 52.1%, while iRobot is up 44.2%. What’s even more surprising is that there might be even more room to grow, as activity continues to be seen across the top platforms for short selling.
Yet, analysts believe there’s growth ahead, offering targets of 16.4% for Ligand Pharmaceuticals and 123.9% for GEO Group. The latter is followed by Californian biologics platform company Coherus BioSciences, given a 52.9% upside target. Generally, they see an upside in both healthcare and IT sectors.
These analysts have gone on to give Ligand Pharmaceuticals and Hibbett Sports a high composite rating of 97. GEO Group, which was given the largest upside, was rated 3.
Business fundamentals will determine the value of stocks in the medium to long-term, but anything goes with younger investors. It certainly tells us something about the changing face of investing.
Sooner or later, this revolution will have to end for Reddit’s fervent investors. It cannot go on forever and the longer it goes, the more people stand to lose. But it makes for a strong symbolic gesture — while all digging into Wall Street’s deep pockets.
This is a sign of things to come. Wall Street will have to watch out because retail investors are savvier than ever. As for the stocks, we’ll have to see if they meet those estimated targets.
What do you think of these developments? Will retail investors continue to vex professional ones? Let us know what you think in the comments below.
Disclosure: Tim Fries has no positions in any of the stocks mentioned, and has no plans to initiate any positions within the 72 hours following the publishing of this article. This article expresses the opinions of Tim Fries. Tokenist Media LLC has no position in any of the stocks mentioned, and does not plan to initiate any positions within 72 hours of the publishing of this article. Please consult our website policy for more information.