Author:
Ihor Dusaniwsky
Managing Director of Predictive Analytics, S3 Partners
Matthew Unterman
Director of Predictive Analytics, S3 Partners
The recent rally off the June 16 lows (S&P 500 +5.36%, Nasdaq +7.57%, Russell 3000 +5.42%) has made some crowded shorts more squeezable. We have seen the number of highly squeezable stocks in our Squeeze metric since June 15more than double, and our average squeeze score has increased by over 250% (from 12.22 to 31.48). The Consumer Discretionary (primarily auto) and HealthCare (Biotech) sectors have the most constituents in the top 25 most squeezable stocks.
Name
Ticker
Short Interest
Crowded Score
Squeeze Score
FARADAY FUTURE INTELLIGENT ELECTRIC
FFIE
$ 188,608,729
82.50
100.00
CANOO INC
GOEV
$ 132,517,741
72.50
100.00
GOSSAMER BIO INC
GOSS
$ 133,305,452
65.00
100.00
VERVE THERAPEUTICS INC
VERV
$ 224,050,733
85.00
100.00
LIGHTWAVE LOGIC INC
LWLG
$ 176,621,188
77.50
100.00
BEAM THERAPEUTICS INC
BEAM
$ 799,359,782
85.00
100.00
COWEN GROUP INC
COWN
$ 185,216,634
60.00
100.00
VERU INC
VERU
$ 385,291,057
80.00
100.00
BEYOND MEAT INC
BYND
$ 843,960,565
100.00
100.00
FATE THERAPEUTICS
FATE
$ 696,167,599
82.50
100.00
ALLOGENE THERAPEUTICS INC
ALLO
$ 265,699,371
72.50
100.00
SPRINGWORKS THERAPEUTICS
SWTX
$ 353,509,286
82.50
100.00
MICROVISION INC
MVIS
$ 202,691,262
95.00
100.00
LORDSTOWN MOTORS CORP
RIDE
$ 103,225,662
85.00
100.00
MARATHON DIGITAL HLDGS INC
MARA
$ 260,457,593
80.00
100.00
AMC ENTERTAINMENT
AMC
$ 1,496,227,678
75.00
100.00
ERASCA INC
ERAS
$ 104,190,305
85.00
100.00
ROCKET COMPANIES INC
RKT
$ 317,818,121
92.50
100.00
DICK'S SPORTING GOODS
DKS
$ 1,383,137,838
85.00
100.00
MICROSTRATEGY INC
MSTR
$ 796,410,236
87.50
100.00
TELADOC HEALTH INC
TDOC
$ 1,475,749,811
80.00
100.00
DUTCH BROS INC
BROS
$ 271,843,208
85.00
100.00
FISKER INC
FSR
$ 460,646,555
92.50
100.00
GAMESTOP CORP
GME
$ 1,917,400,083
87.50
100.00
LUCID GROUP INC
LCID
$ 2,822,006,555
100.00
100.00
Our Crowded Score takes a multi-factor approach to identify short-side crowded securities and take into consideration:
Total short dollars at risk
Short Interest as a true percentage of a company’s tradable float (which includes synthetic longs created by short selling).
Stock Loan liquidity
Trading liquidity
While a stock can be “crowded” it might not necessarily be a short squeeze candidate. An additional variable which is necessary for a short squeeze to occur is substantial net-of-financing mark-to-market losses. A short position, no matter how crowded, that continues to be profitable cannot be squeezed. No trader will be forced to exit a position that continues to be profitable. They may exit or trim their positions if trading or stock loan liquidity diminishes significantly or if their expected Alpha is reached and there are more attractive trades elsewhere. But they will usually continue to “ride the wave” until the wave dissipates, or they are forced out by market conditions such as stock recalls or unpalatable stock borrow fees.
The stocks in our top 25 list all have elevated S3 SI % Float and days-to-cover. Stock borrows are tight in most of these stocks with only six trading at General Collateral levels and twelve are trading at above 10% fee levels. And finally, all these stocks have incurred double digit percentage mark-to-market losses over the last 30 days coupled with mark-to-market losses over the last seven days.
Having a high Squeeze Score does not guarantee that a stock will be squeezed – but it does highlight stocks that a have a much higher squeeze potential than most other stocks in the market. If a trader has significant historical profits in a stock; very high conviction in their investment\trading thesis; a technical or quantitative reason to be in a stock; or is very stubborn with a thick skin for enduring mark-to-market losses, they may remain short in a stock despite its high Crowded and Squeeze scores.
But the chances of getting a tap on the shoulder from a Chief Risk Officer to cut losses and get out of the trade is higher for these stocks. The higher chance that short sellers may be forced to buy-to-cover will only help push stock prices even higher – and making the Squeeze even tighter for the shorts still in the stock.