In this article, we will take a detailed look at the 12 Most Shorted Stocks in 2024. For a quick overview of such stocks, read our article 5 Most Shorted Stocks in 2024.
Short-sellers may be annoying for corporations (and Redditors?), but investors often find themselves thanking these companies for doing the often back-breaking and excruciating research that is required to unfold financial irregularities, fraud, misconduct and mismanagement in corporate America. Short sellers are always in the news as they remain on the lookout for their next prey. Consider Hindenburg Research for example, the activist short-selling firm led by Nathan Anderson. Hindenburg made headlines last year when it went after companies of billionaires Carl Icahn and Gautam Adani. The power of Hindenburg’s attack could be gauged from the fact that Adani’s empire of businesses lost over $100 billion in market value while his personal worth tanked by $80 billion. Adani has since rebounded, but the billionaire’s conglomerate was surely jolted to the core by the short-selling firm.
Performance of Short-Selling Firms in 2024
Stocks sellers aren’t sitting idle this year too. Recently, insurance company Global Life shares tanked, losing about $5 billion in market value in a few hours, after a short-selling firm called Fuzzy Panda Research accused the company of financial misconduct and ignoring insurance fraud. Over the past five days through April 15 Global Life shares have lost about 48% in value. Bloomberg recently said, citing data from short-selling and retail investing data firm Breakout Point, that Fuzzy Panda was the best performing activist short seller in 2023.
But how do short sellers perform when it comes to returns? Do they actually make any money beyond creating a buzz and causing negative PR for major companies? A CNBC report, citing data from Breakout Point, said that Hindenburg’s top short targets last year saw an average share price decline of 42% in 2022. In 2023, the firm’s seven short targets plunged 36% on average.
Benefits of Following Short-Selling Activity in Financial Markets
Long-term investors can take advantage of the information and research conducted by short sellers. A research conducted at Wharton showed that previous studies have “consistently demonstrated that, as a group, short‐sellers are sophisticated investors with superior information processing capabilities.” Some other studies show that short sellers don’t go about preying on companies without any basis. In fact, they use age-old means of market research using financial ratios and fundamental analysis before narrowing down their targets. A research paper published at the University of Michigan Business School talks about research from Asquith and Meulbroek (1996) which says that short sellers “as a group” successfully “identify securities that subsequently underperform the market.” The research also talks in detail about the importance of financial ratios and fundamentals in the world of short-sellers:
“We document a strong relation between the trading strategies of short-sellers and ratios of fundamentals to market prices. Our tests indicate that short-sellers target securities that have low fundamental-to-price ratios and then they unwind their positions as these ratios revert to normal levels. We also show that short-sellers refine their trading strategies in three ways in order to maximize their investment returns. First, short-sellers avoid securities for which the transactions costs of short-selling are high. Second, short-sellers supplement their trading strategies by using information beyond that in fundamental-to-price ratios that has predictive ability with respect to future returns. Third, we show that short-sellers avoid shorting securities with low fundamental to-price ratios when the low ratios are attributable to temporarily low fundamentals. In other words, short-sellers act as if they are able to discriminate between low ratios that are due to temporarily low fundamentals and low ratios that are attributable to temporarily high prices.”
Short-Selling Activity Touching New Highs in 2024
Latest data from Goldman Sachs shows that short-selling activity recently reached its highest level in six months. Short sellers are targeting stocks from telecom and media sector. Goldman Sachs said stocks from the TMT sector account for a whopping 29.1% of total US single stock net exposure. Short sellers are getting emboldened amid the pessimistic mood in the Wall Street these days as strong jobs data and sticky inflation keep crushing investors’ hopes of rate cuts.
Photo by Ruben Sukatendel on Unsplash
Methodology
For this article we used a stock screener to identify stocks with over 30% of their total float shorted. To minimize the effects of volatility and speculation in our analysis, we removed companies with less than $50 million market cap from the results and picked 12 stocks with the highest percentage of float shorted. Some top names in the list include Beyond Meat Inc (NASDAQ:BYND), Arbor Realty Trust Inc. (NYSE:ABR) and B Riley Financial Inc (NASDAQ:RILY).
12. Beyond Meat Inc (NASDAQ:BYND)
Float Shorted: 35.92%
Earlier this month UBS published a list of the most crowded shorts in the consumer staples sector. Beyond Meat Inc (NASDAQ:BYND) was one of the names in the list.
As of the end of the last quarter of 2023, 18 hedge funds tracked by Insider Monkey had stakes in Beyond Meat Inc (NASDAQ:BYND). The most notable stake in Beyond Meat Inc (NASDAQ:BYND) is owned by Dmitry Balyasny’s Balyasny Asset Management which owns a $2.3 million stake in Beyond Meat Inc (NASDAQ:BYND).
11. Novavax Inc (NASDAQ:NVAX)
Float Shorted: 36.51%
Novavax Inc (NASDAQ:NVAX) shares recently dived after Novavax Inc (NASDAQ:NVAX) posted weaker-than-expected Q4 results. For 2024 Novavax Inc (NASDAQ:NVAX) expects revenue in the range of $800 million to $1.0 billion, compared to $969.6 million consensus.
Novavax talked about guidance in its Q4 earnings call:
“In the U.S. market, product sales for the 2023-2024 vaccination season are now expected to come in below $25 million, which is less than our prior target. That said, we are closely monitoring the potential for the CDC to recommend a spring COVID-19 booster, and we’ll assess how that could impact demand and potential sales in the first half of 2024. Our cost of sales for the fourth quarter of 2023 were $155 million as compared to $182 million in the same period in 2022. These periods include $30 million and $99 million, respectively, related to excess, obsolete or expired inventory and losses on firm purchase commitments under third-party supply agreements. Please turn to Slide 20. We are committed to creating a more lean and agile organization to align with the company’s market opportunities.
To advance that goal, over the past year, we’ve reduced our workforce by over 30% compared to the first quarter of 2023. We have also reduced our full year 2023, R&D and SG&A by over $500 million compared to the full year 2022. This result was approximately $150 million better than our original target, and we did so while maintaining core business capabilities and progressing our combination vaccine program. For 2024, we are targeting combined R&D and SG&A expenses of $700 million to $800 million.”
Read the full earnings call transcript here.
Like Beyond Meat Inc (NASDAQ:BYND), Arbor Realty Trust Inc. (NYSE:ABR) and B Riley Financial Inc (NASDAQ:RILY), short sellers are also betting against NVAX.
10. Upstart Holdings Inc (NASDAQ:UPST)
Float Shorted: 36.65%
Upstart Holdings Inc (NASDAQ:UPST) ranks x in our list of the most shorted stocks in 2024 so far. Upstart Holdings Inc (NASDAQ:UPST) has 36% short interest, with 27.13 million of its total float shorted, as of April 8.
As of the end of the fourth quarter of 2023, 22 hedge funds tracked by Insider Monkey reported owning stakes in Upstart Holdings Inc (NASDAQ:UPST). The most significant stake is owned by D. E. Shaw with a $136 million stake.
In addition to UPST, short sellers are betting against Beyond Meat Inc (NASDAQ:BYND), Arbor Realty Trust Inc. (NYSE:ABR) and B Riley Financial Inc (NASDAQ:RILY).
9. Trupanion Inc (NASDAQ:TRUP)
Float Shorted: 39.13%
Pet insurance provider Trupanion Inc (NASDAQ:TRUP) ranks x in our list of the most shorted stocks in 2024 as of April 8. The stock has lost about 38% in value year to date.
8. Phathom Pharmaceuticals Inc (NASDAQ:PHAT)
Float Shorted: 39.18%
Phathom Pharmaceuticals Inc (NASDAQ:PHAT) is working on treatments of acid-related gastrointestinal (GI) disorders. Phathom Pharmaceuticals Inc (NASDAQ:PHAT) has 395 of its total float shorted as of April 8. However, Needham recently said in a report that Phathom Pharmaceuticals Inc (NASDAQ:PHAT) is one of the companies that could be a takeover target soon. Needham’s analyst gave a Buy rating and a $26 price target on the stock.
During its Q4 earnings call, the company’s management talked about guidance and important business updates:
“As of December 31, 2023, cash and cash equivalents were $381 million. This includes $175 million received during the fourth quarter of 2023 from our revenue interest financing agreement upon the approval of Erosive GERD. Also during the fourth quarter, we announced the expansion of our existing term loan facility with Hercules Capital. The amendment provides access to more favorable terms and an additional $100 million in non-dilutive capital, subject to achievement of certain revenue milestones. With this amendment, we now have a total of $160 million available via our debt facility. We believe we are in a solid financial position and reaffirm our expectation that we have cash runway through the end of 2026 based on our current operating plan, expected product revenues and funds available under our term loan.”
7. ImmunityBio Inc (NASDAQ:IBRX)
Float Shorted: 40.37%
With over 53 million of its shares shorted, ImmunityBio Inc’s (NASDAQ:IBRX) short interest stands at 40.37% as of April 8.
As of the end of the last quarter of 2023, 20 hedge funds tracked by Insider Monkey reported owning stakes in ImmunityBio Inc (NASDAQ:IBRX).
6. Biomea Fusion Inc (NASDAQ:BMEA)
Float Shorted: 40.42%
Short sellers are having a field day with Biomea Fusion Inc (NASDAQ:BMEA) since the stock is down 48% over the past one year and 13% so far this year. JPMorgan recently downgraded the stock to Neutral from Overweight.
A total of 16 hedge funds tracked by Insider Monkey had stakes in Biomea Fusion Inc (NASDAQ:BMEA) as of the end of 2023.
Click to continue reading and see 5 Most Shorted Stocks in 2024.
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Disclosure. None. 12 Most Shorted Stocks in 2024 was initially published on Insider Monkey.