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Shorts make money by selling stock in companies they don't own (they "borrow" shares from their broker), with the hopes that they can buy the shares back for less and return the "borrowed" shares back to the broker and make a profit. One problem for shorts is when too many people short the same stock. When a stock is shorted to the point where it becomes an overcrowded trade, it can spark a short squeeze.
A short squeeze is a great risk for shorts. A small jump in price and/or some good news being released by the company can spark panic buying by shorts, who want to cover their shorts and cut potential losses before other shorts.
All of the stocks below have very high levels of short interest. These factors could make these stocks more likely to rise and see a short squeeze. Longs can profit from short squeezes, so sometimes it pays to invest in highly shorted stocks. For shorts, it might not make sense to have the risk of staying short when too many other shorts could cause a squeeze for you.
Here are the companies that could see a short squeeze:
Sequenom, Inc. (NASDAQ:SQNM) is trading around $7.16. Sequenom is a biotechnology company. The 50-day moving average is $6.32 and the 200-day moving average is $6.59. These shares have traded in a range between $4.69 to $8.20 in the last 52 weeks. These shares have been rising and insiders have been buying shares. According to the latest data on shortsqueeze.com, there are about 16.8 million shares short. Based on average volume of just over 1 million shares traded per day, it would take over 10 days' worth of volume to match the number of shares short.
Gannett Incorporated (NYSE:GCI) is trading around $14.80. Gannett owns several major newspapers and is based in Virginia. The 50-day moving average is $15.84 and the 200-day moving average is $14.14. These shares have traded in a range between $11.65 to $19.69 in the last 52 weeks. These shares have been trending higher over the past several months. According to the latest data on shortsqueeze.com, there are about 27.2 million shares short. Based on average volume of just over 3.7 million shares traded per day, it would take about seven days' worth of volume to match the number of shares short.
Boyd Gaming Corporation (NYSE:BYD) is trading around $8.99. Boyd operates casinos and is based in Las Vegas, Nevada. The 50-day moving average is $10.05 and the 200-day moving average is $9.16. These shares have traded in a range between $6.70 to $14.85 in the last 52 weeks. According to the latest data on shortsqueeze.com, there are about 16.8 million shares short. Based on average volume of just over 1.9 million shares traded per day, it would take over eight days' worth of volume to match the number of shares short.
Local.com (NASDAQ:LOCM) is trading around $3.96. Local.com is an Internet company and is based in Virginia. The 50-day moving average is $3.89 and the 200-day moving average is $4.57. These shares have traded in a range between $3.22 to $8.85 in the last 52 weeks. These shares have been trending lower recently, but they may have bottomed out. According to the latest data on shortsqueeze.com, there are about 3.64 million shares short. Based on average volume of just over 300,000 shares traded per day, it would take about 10 days' worth of volume to match the number of shares short.

Janus Capital Group, Inc. (NYSE:JNS) is trading around $12.23. Janus is a leading investment manager and is based in Colorado. The 50-day moving average is $12.74 and the 200-day moving average is $11.60. These shares have traded in a range between $8.63 to $15.67 in the last 52 weeks. These shares have been trending higher over the past few months, although lately there has been a dip. According to the latest data on shortsqueeze.com, there are about 19.5 million shares short. Based on average volume of just over 2.4 million shares traded per day, it would take about eight days' worth of volume to match the number of shares short.

MGIC Investment Corp. (NYSE:MTG) is trading around $8.76. MGIC is a surety and title insurance company and is based in Wisconsin. The 50-day moving average is $8.86 and the 200-day moving average is $8.94. These shares have traded in a range between $6.48 to $13.80 in the last 52 weeks. According to the latest data on shortsqueeze.com, there are almost 27.7 million shares short. Based on average volume of just over 4.2 million shares traded per day, it would take about seven days' worth of volume to match the number of shares short.

Stewart Information Services Corp. (NYSE:STC) is trading around $10.74. Stewart is a surety and title insurance company and is based in Texas. The 50-day moving average is $10.79 and the 200-day moving average is $10.73. These shares have traded in a range between $7.79 to $14.86 in the last 52 weeks. According to the latest data on shortsqueeze.com, there are almost 2 million shares short. Based on average volume of just over 72,000 shares traded per day, it would take about 27 days' worth of volume to match the number of shares short. Of all the stocks mentioned here, this one appears the most likely to see a short squeeze.

Source: 7 Stocks That Might Surge in a Short Squeeze