In this article, we discuss the 10 most shorted stocks to watch in September. If you want to skip our analysis on short selling, go directly to the 5 Most Shorted Stocks in September.
In the past two years, short squeezes have become a hot and a controversial topic on Wall Street. Reddit became a leading platform where retail investors started discussions and came together to initiate a long position in some of the stocks that were heavily shorted by hedge funds and institutional investors. These campaigns began to cause short squeezes as short sellers were forced to buy shares and cover their positions. Many observers believe that short sellers make the market efficient as they are the first to call out the problems of a company by taking a short position on its shares. According to Adam Reed, a finance professor at the University of North Carolina, stocks that have a high short-interest ratio tend to underperform the broader market. Mr. Reed is considered an expert on the importance of short-sale data.
In the current macroeconomic circumstances, the broader market lacks any catalysts to generate strong returns. One of the few opportunities for investors to earn profits is through buying the most shorted stocks in the expectation that a short squeeze would cause the stock price to rise significantly. The majority of the companies in our list of the ten most shorted stocks in September belong to the biotech and technology segment, as these companies are still trading at a significant valuation that some investors are unable to wrap their heads around. Furthermore, the short sellers believe that the increase in benchmark interest rate by the Federal Reserve will only make matters worse for these companies. This is because the present value of future cash flows declines when the benchmark interest rates increase. Some of the most shorted stocks in September include Beyond Meat, Inc. (NASDAQ:BYND), MicroStrategy Incorporated (NASDAQ:MSTR), and Sirius XM Holdings Inc. (NASDAQ:SIRI).
Our Methodology
We have listed stocks that have at least 30% of their float sold short as of August 30. The business fundamentals and the overall market sentiment on the stocks have been discussed to understand the rationale behind the high short interest ratio in these companies. The stocks have been ranked according to the level of hedge fund ownership as of Q2 2022, according to Insider Monkey’s database of 895 elite hedge funds.
10 Most Shorted Stocks in September
10. Cassava Sciences, Inc. (NASDAQ:SAVA)
Number of Hedge Fund Holders: 2
Float Shorted: 33.25%
Cassava Sciences, Inc. (NASDAQ:SAVA) is an Austin, Texas-based clinical-stage biotech company that changed its name from Pain Therapeutics, Inc. in 2019. The company is focused on neuroscience with an emphasis on Alzheimer’s disease. In the US alone, there are five million patients suffering from this ailment.
Cassava Sciences, Inc. (NASDAQ:SAVA) stock is undergoing a sort of short squeeze as it is hovering around a five-month high with no substantial development backing this surge. In July, the stock price of Cassava Sciences, Inc. (NASDAQ:SAVA) plummeted after a report by Reuters claimed that the US Department of Justice had initiated a criminal investigation regarding the experimental Alzheimer’s therapy offered by the company. However, Cassava Sciences, Inc. (NASDAQ:SAVA) promptly declined these claims.
The recent rally in Cassava Sciences, Inc. (NASDAQ:SAVA) stock price can be partially attributed to two purchases by Directors Richard Barry and Sanford Robertson. Mr. Robertson is a co-founder at technology buyout Francisco Partners, and he acquired 100,000 shares of Cassava Sciences, Inc. (NASDAQ:SAVA) in August for over $2 million. The value of his stake has nearly doubled following the recent surge in stock price.
9. Groupon, Inc. (NASDAQ:GRPN)
Number of Hedge Fund Holders: 11
Float Shorted: 33.48%
Groupon, Inc. (NASDAQ:GRPN) is a Chicago, Illinois-based e-commerce entity that was founded in 2008 and is known for employing a group discount model. Groupon, Inc. (NASDAQ:GRPN) is at the ninth position on our list of the ten most shorted stocks in September.
Groupon, Inc. (NASDAQ:GRPN) has become one of the most shorted stocks in September because of its declining revenue, as it fell by 42.4% YoY to $153.2 million at the end of Q2 2022. Furthermore, according to TechCrunch, the company has laid off over 500 employees. This is a significant number as the most recent annual 10-k filing revealed that Groupon, Inc. (NASDAQ:GRPN) had a headcount of 3,675 employees at the end of 2021.
However, the company is undergoing a restructuring that is expected to generate positive cash flows by the end of this year. Following all these developments, Trevor Young at Barclays slashed the price target on Groupon, Inc. (NASDAQ:GRPN) from $12 to $10 and maintained an Underweight rating on the stock. The analyst highlighted the withdrawal of 2022 guidance and the $200 million multi-year restructuring plan as an overhang on Groupon, Inc. (NASDAQ:GRPN) stock.
Of the 895 hedge funds tracked by Insider Monkey at the end of Q2 2022, Groupon, Inc. (NASDAQ:GRPN) was held by 11 hedge funds.
8. PMV Pharmaceuticals, Inc. (NASDAQ:PMVP)
Number of Hedge Fund Holders: 12
Float Shorted: 35.71%
PMV Pharmaceuticals, Inc. (NASDAQ:PMVP) is a Cranbury, New Jersey-based biotech company that has come up with a precision oncology platform. The platform is leveraging the power of the p53 tumor suppressor.
The company has joined forces with leading pharmaceutical company Merck & Co., Inc. (NYSE:MRK) to study the efficacy of its lead candidate PC14586 with anti-PD-1 therapy Keytruda developed by Merck in treating advanced solid tumors. The inclusion of PMV Pharmaceuticals, Inc. (NASDAQ:PMVP) will create a combination arm in research involving patients suffering from advanced solid tumors.
One of the probable reasons for investors shorting PMV Pharmaceuticals, Inc. (NASDAQ:PMVP) stock could be the company’s heavy reliance on the successful outcome of its lead candidate, PC14586. It is the only substantial candidate in the pipeline that is presently in the Phase-I of the study. All the remaining candidates are at the early stage of discovery.
OrbiMed Advisors was the leading hedge fund investor in PMV Pharmaceuticals, Inc. (NASDAQ:PMVP) during the second quarter of 2022. The hedge fund held over 6.5 million shares in the company, worth nearly $93.5 million as of Q2 2022.
7. Big Lots, Inc. (NYSE:BIG)
Number of Hedge Fund Holders: 14
Float Shorted: 63.09%
Big Lots, Inc. (NYSE:BIG) is a Columbus, Ohio-based retail company that was founded in 1967 and has a presence of over 1,400 stores across 47 states in the US. The company is primarily involved in décor, food, and furniture.
As of August 30, Big Lots, Inc. (NYSE:BIG) had over 60% of its float sold short, making it one of the most shorted stocks to watch in September. In a research note issued to investors on September 16, Matthew Boss at JPMorgan increased the price target on Big Lots, Inc. (NYSE:BIG) from $8 to $9 but maintained an Underweight rating on the stock. The expected December 2023 target price reflects a potential downside of over 51% from the closing price as of September 21. The significant downside potential expected by the research firm could be a major reason for such heavy short-selling of Big Lots, Inc. (NYSE:BIG) stock. However, the analyst appreciated the recovery in the retail sector during August 2022 as opposed to the bottom reached in June 2022.
Mill Road Capital Management held over 1 million shares in Big Lots, Inc. (NYSE:BIG) with a value of over $30.6 million as of Q2 2022.
6. Heron Therapeutics, Inc. (NASDAQ:HRTX)
Number of Hedge Fund Holders: 17
Float Shorted: 34.86%
Heron Therapeutics, Inc. (NASDAQ:HRTX) is a San Diego, California-based biotech company that is involved in developing chemotherapy-induced and postoperative nausea and vomiting prevention therapeutics along with pain management treatments.
Heron Therapeutics, Inc. (NASDAQ:HRTX) has 34.86% of its float sold short as of August 30, warranting its inclusion in our list of the ten most shorted stocks in September. Heron Therapeutics, Inc. (NASDAQ:HRTX) slashed its headcount by 34% in June 2022. This was part of a restructuring plan that will result in an annual saving of $43 million. To improve its liquidity position, which stood at $83 million at the end of Q2 2022, Heron Therapeutics, Inc. (NASDAQ:HRTX) raised over $75 million through secondary offerings in August. Meanwhile, Heron Therapeutics, Inc. (NASDAQ:HRTX) burned through $28.2 million of its cash during Q2 2022. The company expects the cash burn to increase further due to the impact of the restructuring efforts. The company also needs to increase its revenue significantly to achieve cash flow breakeven.
Although Heron Therapeutics, Inc. (NASDAQ:HRTX) received approval for Aponvie from the US Food and Drug Administration, the preventer of postoperative nausea and vomiting medicine is still competing with numerous generic medicines in the same segment.
Baker Bros. Advisors was the leading hedge fund investor in Heron Therapeutics, Inc. (NASDAQ:HRTX) during Q2 2022.
In addition to Heron Therapeutics, Inc. (NASDAQ:HRTX), some of the most shorted stocks in September include Beyond Meat, Inc. (NASDAQ:BYND), MicroStrategy Incorporated (NASDAQ:MSTR), and Sirius XM Holdings Inc. (NASDAQ:SIRI).
Click to continue reading and see the 5 Most Shorted Stocks in September.
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Disclose. None. 10 Most Shorted Stocks in September is originally published on Insider Monkey.
