For the ultimate contrarian, few market categories exist that induce white-knuckled pressure quite like stocks with high short interest. At its most simplistic level, bullish traders targeting highly shorted securities believe that the underlying volatility has gone too far. As a result, going against the grain may yield astounding returns.
Such massive rewards are possible because of the nature of short-squeeze stocks. To initiate a short position, traders must a) borrow the shares they’re betting against and b) sell said shares immediately hoping they go down. If they do, the shorts buy back the borrowed quantity of shares, returning them to the lender while pocketing the profits (minus various administrative costs).
It sounds simple for the bears unless the shares swing higher. Since no theoretical upside limit exists, bears can be on the hook for unlimited losses. Therefore, stocks with high short interest may spark panic. And that panic is what drives this contrarian practice. Still, companies with high short interest are that way for a reason. Keep that in mind as you ponder the below short-squeeze stocks.
Bruush Oral Care (BRSH)
No, Bruush Oral Care (NASDAQ:BRSH) isn’t on this list of stocks with high short interest because of a typo. That’s how you spell the brand. All levity aside, Bruush offers an intriguing business. Per its website, the company offers an electric toothbrush kit plus a subscription to promote dentist-level cleanliness. With the enterprise featured in multiple publications – including The Wall Street Journal – it might be something to pick up.
However, most traders apparently don’t think much of BRSH. Since the beginning of this year, shares lost a troubling 69% of equity value. In the trailing one-year period, they’re down a shocking 93%. Based on this context, it’s no surprise that BRSH ranks among the short-squeeze stocks. Specifically, data from Benzinga notes that BRSH carries a short interest of 58.21% of its float.
On a financial note, it’s possible that Bruush could swing back following sharp losses. For one thing, the company doesn’t carry any debt, meaning that it enjoys incredible flexibility. Moreover, buying an advanced toothbrush yields cost savings from having to deal with expensive procedures.
A controversial enterprise, Lottery.com (NASDAQ:LTRY) ranks among the stocks with high short interest because of its fascinating appeal. Basically, speculation is almost hardwired into the human psyche. That said, one can’t ignore the dark side of the lottery business. Without getting bogged down into the granularity, lotteries tend to cluster in low-income (as in underprivileged) communities.
Setting aside the predatory undertones of games of chance, plenty of adults can willful choices to participate. Therefore, it’s not all that surprising to see LTRY gain nearly 39% of its equity value since the year’s start. Here’s the thing, though: in the past six months, LTRY gave up more than 65%. Right now, it’s one of the most heavily targeted securities by bears, with a short interest of 78.26% of the float.
Unlike Bruush Oral Care, few redeeming financial qualities exist for Lottery.com. Indeed, investment data aggregator Gurufocus warns that LTRY suffers from five red flags, including fading revenue. Still, for a quick gamble on short-squeeze stocks, this might yield (briefly) positive results.
Hall of Fame Resort & Entertainment (HOFV)
On paper, Hall of Fame Resort & Entertainment (NASDAQ:HOFV) sounds quite appealing. Billed as a world-class resort and sports entertainment firm, Hall of Fame leverages unique brand partnerships and direct access to exclusive content. Through this approach, the company creates exceptional experiences across multiple platforms. Notably, the resort operator appointed former NFL star Jerome Bettis (a hall of famer himself) to its board of directors.
Given the popularity of the NFL, Hall of Fame could turn out to be a promising brand. For now, it’s one of the stocks with high short interest. Since the start of the year, HOFV lost only 2%, which doesn’t sound that bad. However, in the trailing one-year period, shares collapsed to the tune of 70%.
Naturally, bears have aligned their crosshairs on HOFV, which presently carries a short interest of 78.08% of its float. Also, its short-interest ratio runs at an elevated 17.4 days to cover. I suppose, though, that the bears need one bad moment in the market to spark a panic. This is one for the speculators to watch closely.
On the date of publication, Josh Enomoto 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.