The next GameStop? 38 heavily shorted stocks that retail investors could target next, according to Goldman Sachs
Take a closer look at which companies made the list
Tony Moy, a watercolor and comic artist who invested $1,200 in GameStop, explains why he took the risk as a new investor.
The GameStop frenzy may have quieted down, but according to Goldman Sachs, the retail trading boom could happen again soon.
Although many aspects of GameStop's wild ride were unique, there are certain conditions that allowed the struggling video game retailer's stock to surge 1000% in two weeks that could be easily repeated, according to Goldman: For one, retail traders have seen their cumulative fortune climb by $1 trillion since the start of the coronavirus pandemic. And the second: There are a lot of heavily shorted stocks on the market.
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In a note to clients, Goldman chief U.S. equity strategist David Kostin said there are still stocks with heavy bets built up against them from Wall Street investors who bet on stock's decline by selling shares they don't own.
"The past 25 years have witnessed a number of sharp short squeezes in the U.S. equity market, but none as extreme as has occurred recently," Kostin wrote in the note, published on January 29. "In the last three months, a basket containing the 50 Russell 3000 stocks with market caps above $1 billion and the largest short interest as a share of float has rallied by 98%."
The return on highly shorted stocks is currently the highest ever recorded, he said. Still, the rally of heavily shorted stocks has taken place against a "backdrop of very low levels of aggregate short interest," he added, though noted there could still be significant losses for hedge funds.
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"In recent years elevated crowding, low turnover, and high concentration have been consistent patterns, boosting the risk that one fund's unwind could snowball through the market," Kostin wrote.
These 38 stocks had the largest bets against them of any Russell 3000 stocks as of Jan. 29, according to Goldman:
- GameStop
- Ligand Pharmaceuticals Incorporated Health Care
- Bed Bath & Beyond
- National Beverage Corp.
- AMC Networks Inc.
- SunPower Corporation
- Macerich Company Real Estate
- Tanger Factory Outlet Centers
- Tootsie Roll Industries
- Accelerate Diagnostics, Inc.
- Academy Sports and Outdoors
- BigCommerce Holdings
- Gogo Inc.
- Beyond Meat
- Ontrak, Inc.
- Clovis Oncology
- Esperion Therapeutics
- Rocket Companies
- Seritage Growth Properties
- iRobot Corporation
- CarParts.com
- Children's Place
- B&G Foods
- Inovio Pharmaceuticals
- Precigen
- Stitch Fix
- Lemonade Inc.
- PetMed Express
- Zynex
- Dillard's
- Sorrento Therapeutics
- Workhorse Group
- Retractable Technologies
- Vaxart
- Vir Biotechnology
- Revlon
- Fulgent Genetics
- Cinemark Holdings