In this article, we look at the 10 Worst ADR Stocks To Buy According to Short Sellers.
An American Depositary Receipt (ADR) is a certificate issued by a U.S. bank that represents shares of a foreign company. These certificates allow U.S. investors to buy shares in foreign companies as if they were regular U.S. stocks. ADRs make it easier for American investors to invest in foreign companies and help foreign companies attract investment from the U.S. without needing to go through the complicated process of listing directly on U.S. stock exchanges.
Despite benefits, less than 10% of large foreign companies list their shares in the U.S. First, some companies that don’t list in the U.S. may already be valued at a high level, so they don’t see much-added benefit. Secondly, the owners and managers of these foreign companies (often families) might not want a U.S. listing because it could limit their control and ability to benefit personally from the company.
Shifting Tides & Global Opportunities
Alibaba’s initial public offering (IPO) in 2014 was a landmark event, raising $25 billion in what was then the largest IPO in history. This success was part of a broader trend where numerous Chinese firms sought to list in the U.S., attracted by the potential for high valuations and access to global capital. Fast forward to recent years, and the picture has changed markedly. The once-vibrant market for Chinese IPOs on Wall Street has withered. In 2023, Chinese companies raised only about $580 million through U.S. listings, a dramatic drop compared to the previous years. This decline is exacerbated by geopolitical tensions between China and the U.S., which have created a challenging environment for Chinese firms seeking to go public abroad.
According to a report by the US-China Economic and Security Review Commission, there are approximately 256 Chinese firms on the New York Stock Exchange, NASDAQ, and NYSE American. However, the political and economic shift has impacted investor confidence and market performance. Notably, 11 Chinese firms, including prominent state-owned entities such as China Eastern Airlines and China Southern Airlines, have delisted from U.S. exchanges over the past year.
In the UK major companies such as Shell, are moving their listings to the U.S. markets as they tend to be valued higher in the U.S. than in the UK, which helps them raise more money and get better growth opportunities. Several factors such as Brexit, high interest rates, fewer tech companies, and a lack of domestic investors have contributed to this migration. More than 30 companies with a market capitalization of over $125 million are exiting the UK’s public equity markets. Thirteen companies have completed takeover bids, while 17 companies have delisted.
Given the weakness in the U.S. market, analysts forecast that now is a good time to invest in foreign stocks. Over the past 12 years, U.S. stocks have outperformed international stocks in 10 of those years, driven by a strong bull market. However, historically, international stocks have often outperformed, especially when the U.S. market isn’t as robust as it has been over the last decade. Morningstar data shows that international stocks outperformed in 60 of the 64 years when U.S. market returns were below 6%, and in all 45 years when returns were below 4%. During periods of U.S. market weakness, investors often seek growth opportunities abroad, which could position ADRs to outperform American stocks during the current bear market.
While the U.S. market has enjoyed a prolonged period of dominance, the shifting global landscape presents a compelling case for diversifying into international stocks. With geopolitical dynamics, economic uncertainty, and the potential for weaker U.S. market returns in the coming years, foreign companies offer growth opportunities that American stocks may struggle to match. With that in context let’s take a look at the 10 worst ADR stocks to buy according to short sellers.
Photo by Pascal Bernardon on Unsplash
Our Methodology
For this article, we used the Finviz stock screener to find the foreign companies listed in the US. From that list, we shortlisted companies that have the highest percentage of shares outstanding that were sold short as of September 18. The list is sorted in ascending order of their short float as of September 18.
Why do we care about what hedge funds do? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
10 Worst ADR Stocks To Buy According to Short Sellers
10. Immatics (NASDAQ:IMTX)
Short Interest as % of Shares Outstanding: 14.46%
Number of Hedge Fund Investors in Q2 2024: 33
Immatics (NASDAQ:IMTX) is a German biopharmaceutical company specializing in cancer immunotherapy. The company is developing new cancer treatments by focusing on immunotherapies that redirect cells to attack cancer by the Adoptive Cell Therapies (ACT) approach. This approach involves taking a patient’s immune cells or using cells from a donor, then modifying these cells in the lab to destroy cancer cells. The company also uses Antibody-like TCR Bispecifics molecules which are designed to activate immune cells against cancer cells.
On September 16, Immatics (NASDAQ:IMTX) unveiled its initial findings for IMA401 from its ongoing Phase 1 dose escalation trial, which demonstrated anti-tumor activity and a manageable safety profile. The data showed an objective response rate (ORR) of 29%, with confirmed responses in 25% of patients and a disease control rate of 53%. The company has announced that it will regain full rights to IMA401 following the end of its collaboration with Bristol Myers Squibb on December 12, allowing it to advance the drug independently and explore further clinical development opportunities. The company sees tremendous potential in the medication’s ability to deliver a meaningful impact on the lives of cancer patients.
Despite 14.46% of shares being shorted, 33 hedge funds showed a bullish stance on the stock, holding stocks worth $692.15 million as of the second quarter. Perceptive Advisors is the largest shareholder in the company, holding $93.96 million worth of stock as of June 30. Industry analysts maintain a consensus Buy rating for the company’s stock, with an average price target of $19.22 which represents a 44.21% upside potential from its current levels.
9. On (NYSE:ONON)
Short Interest as % of Shares Outstanding: 14.82%
Number of Hedge Fund Investors in Q2 2024: 34
On (NYSE:ONON) is a Swiss-based sportswear company specializing in performance footwear, apparel, and accessories. The company was founded in 2010 by former professional athlete Olivier Bernhard alongside Caspar Coppetti and David Allemann. The company is known for its patented CloudTec technology, which revolutionizes the running experience with its unique cushioning system. On (NYSE:ONON) partners with elite athletes such as Roger Federer and Zendaya and has expanded its presence worldwide.
In Q2, On’s (NYSE:ONON) sales increased by 28% to $672.56 million. The growth was especially evident in the Direct-to-Consumer and wholesale channels, both performing well despite some logistical challenges at the Atlanta warehouse. Their strategy emphasizes long-term goals, underscored by athlete performances at the Paris Games, where Hellen Obiri and Iga Swiatek brought home medals.
The company is enhancing its DTC sales through its e-commerce platform, which provides better margins than wholesale channels, and is rapidly expanding its global presence, particularly in key markets like the U.S. and China by opening new retail stores. The company’s partnerships with well-known athletes enhance its brand visibility and credibility, leading to strengthened customer relationships and improved profitability.
While 14.82% of the company’s shares are shorted, 34 hedge funds have maintained a bullish sentiment on the stock as of the second quarter with stakes worth $692.15 million. Select Equity Group is the largest shareholder in the company, holding $287.81 worth of stock as of June 30. Industry analysts forecast the company to increase its earnings by 82.51% this year.
8. MoonLake Immunotherapeutics (NASDAQ:MLTX)
Short Interest as % of Shares Outstanding: 15.13%
Number of Hedge Fund Investors in Q2 2024: 32
MoonLake Immunotherapeutics (NASDAQ:MLTX), headquartered in Switzerland, is a clinical-stage biotechnology company focused on advanced therapies for inflammatory diseases. The company’s leading product, Sonelokimab is currently under approval and is a Nanobody designed to target hard-to-treat inflammation, particularly in severe skin conditions such as hidradenitis suppurative (HS).
HS affects millions worldwide, however, current treatment remains limited, MoonLake Immunotherapeutics’s (NASDAQ:MLTX) Sonelokimab medication is at the forefront of biotechnological solutions to create transformative treatments for chronic inflammatory diseases. The medication is going through a Phase 3 trial program which is enrolling 800 patients and initial data is anticipated to arrive in mid-2025.
On June 10, MoonLake Immunotherapeutics (NASDAQ:MLTX) received positive regulatory feedback from both the FDA (U.S. Food and Drug Administration) and the EMA (European Medicines Agency) for Sonelokimab to treat psoriatic arthritis (PsA). Based on previous feedback from the Phase 3 program, the company is starting its IZAR program which consists of two global trials namely IZAR-1 and IZAR-2. Both trials will test 60mg and 120mg doses of Sonelokimab and will enroll approximately 1,500 patients and use data from the earlier trials to support regulatory approval. The primary endpoint readout is expected by the end of 2026, with the first patient randomization in Q4 2024.
Despite 15.13% of shares being shorted, 32 hedge funds showed a bullish stance on the stock as of the second quarter with stocks worth $1.96 billion. Biotechnology Value Fund is the largest shareholder in the company, holding $956.40 million worth of stock as of June 30. Industry analysts maintain a consensus Buy rating for the company’s stock, with an average price target of $72.86, representing a 30.38% upside potential from its current levels.
7. Despegar.com (NYSE:DESP)
Short Interest as % of Shares Outstanding: 15.63%
Number of Hedge Fund Investors in Q2 2024: 24
Despegar.com (NYSE:DESP) online travel platform that operates in 19 countries in the Latin America region. The company operates through two primary segments: Air, which focuses on selling airline tickets, and Packages, Hotels, and Other Travel Products, which encompasses travel bundles, cruise tickets, and related offerings.
On August 15, Despegar.com (NYSE:DESP) entered a strategic alliance with World2Meet, the travel division of Spain’s Iberostar Group. As part of the agreement, World2Meet has acquired Despegar.com’s (NYSE:DESP) Destination Management Company (DMC), BDExperience. World2Meet will now be the preferred partner for destination services in Mexico and the Dominican Republic. This move allows the company to focus more on its core business and strengthen its growth strategy. Additionally, the company’s strategic emphasis on high-margin package sales and non-air revenue streams is expected to help the company navigate a challenging economic environment caused by the devaluation of currencies in the Latin America region.
Analysts forecast an improvement in gross margins, driven by cost reductions and the increased use of AI technology. Stronger cash flow is anticipated in the second half of 2024. While 15.63% of the company’s shares are shorted, 24 hedge funds have maintained a bullish sentiment on the stock as of the second quarter with stakes worth $228.82 million. No Street Capital is the largest shareholder in the company, holding $38.36 million worth of stock as of June 30. Industry analysts maintain a consensus Buy rating, with an average price target of $17.50, representing a 31.86% upside potential from its current levels.
6. Tecnoglass (NYSE:TGLS)
Short Interest as % of Shares Outstanding: 16.24%
Number of Hedge Fund Investors in Q2 2024: 16
Tecnoglass (NYSE:TGLS) based in Colombia, is a leading manufacturer of architectural glass, windows, and aluminum products serving the global residential and commercial construction industries. The company operates one of the largest and most integrated glass and aluminum manufacturing complexes in the world and is well-known for its high-quality, energy-efficient products, including tempered, laminated, insulated, and low-emissivity glass solutions. Tecnoglass (NYSE:TGLS) has expanded its geographical footprint, particularly in the U.S. market, where it derives over 90% of its revenues, with Florida being one of its key markets.
As of Q2, Tecnoglass (NYSE:TGLS) has a backlog of almost $1 billion. The backlog has been growing consistently since 2021, and the company expects this momentum to continue, with a book-to-bill ratio standing at 1.5 times. This backlog provides the company a promising revenue through 2025 and into 2026. Moreover, the company is expanding beyond Florida by opening new showrooms and is improving its brand recognition and demand for its products.
Tecnoglass (NYSE:TGLS) is also expanding into the vinyl market which has contributed meaningfully to the company’s single-family residential revenues by expanding its dealer base and offering innovative products such as impact-resistant and energy-efficient vinyl solutions. The company expects to ramp up its vinyl business further in the second half of 2024.
Despite 16.24% of shares being shorted, 16 hedge funds showed a bullish stance on Tecnoglass’ (NYSE:TGLS) stock as of the second quarter. Owls Nest Partners is the largest shareholder in the company, holding $38.95 million worth of stock as of June 30.
5. Canadian Solar (NASDAQ:CSIQ)
Short Interest as % of Shares Outstanding: 16.56%
Number of Hedge Fund Investors in Q2 2024: 10
Canadian Solar (NASDAQ:CSIQ) is one of the world’s largest solar technology and renewable energy company in the world. The company designs, manufactures, and sells solar photovoltaic modules and offers solar energy and battery storage solutions. Canadian Solar (NASDAQ:CSIQ) operates two primary business segments: CSI Solar, which focuses on manufacturing solar products, and Recurrent Energy, a global developer of solar and storage assets. The company has built a strong presence in North America, Europe, and Asia, and has a robust project pipeline in solar and energy storage.
According to a report by Markets and Markets, the global battery energy storage market size is valued at $7.8 billion in 2024 and is projected to reach $25.6 billion by 2029, at a CAGR of 26.9%. Canadian Solar (NASDAQ:CSIQ) has made significant advancements in the energy storage sector and offers integrated storage solutions that combine its solar modules with battery storage technologies, enabling more efficient energy use.
Canadian Solar’s (NASDAQ:CSIQ) energy storage segment has seen impressive growth, driven by rising demand for energy storage solutions worldwide as more utilities, businesses, and governments look for ways to manage renewable energy more effectively. The company’s energy storage business has developed a strong pipeline of projects across the globe, with several key installations already operational and more in the pipeline. As of Q2, the company has a contracted pipeline of over 31 GWh for storage projects.
While 16.56% of the company’s shares are shorted, 10 hedge funds have maintained a bullish sentiment on the stock as of the second quarter with stakes worth $48.12 million. Adage Capital Management is the largest shareholder in the company, holding $55.37 worth of stock as of June 30. Industry analysts maintain a consensus Buy rating, with an average price target of $20.33, representing a 32.6% upside potential from its current levels.
4. UroGen Pharma (NASDAQ:URGN)
Short Interest as % of Shares Outstanding: 16.87%
Number of Hedge Fund Investors in Q2 2024: 25
UroGen Pharma (NASDAQ:URGN) is an Israeli biopharmaceutical company focused on developing treatments for uro-oncology diseases, particularly bladder cancer. The company focuses on non-surgical treatment options that improve patient outcomes.
RTGel is a hydrogel-based sustained-release technology developed by UroGen Pharma (NASDAQ:URGN) is designed to increase the amount of time that urinary tract tissue is exposed to medication, which has the potential to make therapy a more effective treatment option. The company’s JELMYTO, has shown impressive clinical outcomes with a 58% complete response rate for low-grade upper tract urothelial cancer and is known for its durable and long-lasting effects.
UroGen Pharma’s (NASDAQ:URGN) UGN-102 is currently under FDA submission and is anticipated to target a $5 billion market for low-grade intermediate-risk non-muscle invasive bladder cancer (LG-IR-NMIBC). Approval for UGN-102 is expected as early as the first quarter of 2025 which is expected to position the company as a key player in the urological oncology space.
Despite 16.87% of shares being shorted, 25 hedge funds showed a bullish stance on the stock as of the second quarter and owns stocks worth $329.33 million. Adage Capital Management is the largest shareholder in the company, holding $55.37 million worth of stock as of June 30. Industry analysts maintain a consensus Buy rating for the company’s stock, with an average price target of $43.10, representing a 101.5% upside potential from its current levels.
3. ZIM Shipping (NYSE:ZIM)
Short Interest as % of Shares Outstanding: 17.00%
Number of Hedge Fund Investors in Q2 2024: 26
ZIM Shipping (NYSE:ZIM) is a global container shipping company headquartered in Israel. The company operates one of the largest shipping networks in the world provides a full range of shipping solutions in over 90 countries and serves more than 32,000 customers in approximately 300 ports around the world. ZIM Shipping (NYSE:ZIM) specializes in containerized cargo using modern and environmentally friendly LNG-powered vessels.
ZIM Shipping (NYSE:ZIM) is optimizing its operations by replacing older, less efficient chartered vessels with larger, new-builds through its fleet renewal program, which saw the delivery of 38 out of the 46 new-build container ships. These new vessels are powered by liquefied natural gas (LNG) making them modern, fuel-efficient, and better suited to the company’s trade routes. This transition to newer vessels is helping the company to reduce costs, improve fuel efficiency, and increase its competitiveness in the market. In Q2, ZIM Shipping’s (NYSE:ZIM) carried volume increased to 952,000 TEU, marking an 11.7% increase compared to the same quarter last year and a 13% increase compared to the first quarter of 2024.
The company now operates a fleet of 148 vessels, including 132 container ships and 16 car carriers, with a total capacity of approximately 755,000 TEUs and saw a 40% year-over-year increase in average freight rates, which stood at $1,674 per TEU for Q2. ZIM Shipping‘s(NYSE:ZIM) overall revenues also saw substantial growth, with the company reporting $3.5 billion in total revenues for the first half of 2024, a 30% year-over-year increase.
While 17% of the company’s shares are shorted, 26 hedge funds have maintained a bullish sentiment on the stock as of the second quarter, with stocks worth $455.13 million. D E Shaw is the largest shareholder in the company, holding $107.43 million worth of stock as of June 30. Industry analysts expect the company to grow its earnings by 100% this year and maintain a consensus Buy rating, with an average price target of $20.03, representing a 12.5% upside potential from its current levels.
2. Fiverr (NYSE:FVRR)
Short Interest as % of Shares Outstanding: 17.31%
Number of Hedge Fund Investors in Q2 2024: 19
Fiverr (NYSE:FVRR) is based in Israel and is a global marketplace for freelance services. The platform connects freelancers with clients worldwide and is used by both individuals and businesses to outsource tasks.
According to a report by the Business Research Company, the freelance platforms market was valued at $7.49 billion in 2024 and is expected to reach $13.92 billion by 2028, growing at a CAGR of 16.8%. With its established global presence and diverse range of freelance services, Fiverr (NYSE:FVRR) is well-positioned to capitalize on the expanding freelance platform market’s strong growth and increasing demand for flexible, on-demand work solutions.
The company’s new product releases, such as the AI-powered Neo and the profession-based catalog, along with strategic acquisitions such as AutoDS, an app that automates the dropshipping process solidify the company’s position in the growing freelance and remote work sector. In Q2 2024, Fiverr (NYSE:FVRR) reported a revenue of of $94 million, a 6% increase year-over-year, with a gross margin of 83.1%, up from 82.5% the previous year. The company’s Buyer Spend per Active User grew by 10%, even though active buyers decreased by 8% to 3.9 million. Free cash flow increased 12% year-over-year to $20.7 million.
Fiverr’s (NYSE:FVRR) profession-based catalog is a game-changer in its transition to more complex and long-term freelance contracts. Management believes this will significantly expand the company’s total addressable market by attracting businesses with long-term hiring needs. Furthermore, Fiverr’s AI tool Neo enhances user experience by streamlining navigation and delivering tailored service recommendations, enabling clients to find freelancers more efficiently on the platform.
Fiverr (NYSE:FVRR) is trading 10.81 times its earnings, which is a 45% discount compared to the sector median of 19.89. Despite 17.31% of shares being shorted, 19 hedge funds showed a bullish stance on the stock as of the second quarter, with stocks worth $90.53 million. Engine Capital is the largest shareholder in the company, holding $19.07 million worth of stock as of June 30. Industry analysts maintain a consensus Buy rating for the company’s stock, with an average price target of $31.90, representing a 20.64% upside potential from its current levels.
1. Lifezone Metals (NYSE:LZM)
Short Interest as % of Shares Outstanding: 18.45%
Number of Hedge Fund Investors in Q2 2024: 10
Lifezone Metals (NYSE:LZM) is a mining and metals refining company headquartered in the United Kingdom. The company focuses on the production of critical metals. Lifezone Metals (NYSE:LZM) is known for its Hydromet Technology, which is a method that has the potential to replace smelting for base and precious metals refining.
Lifezone Metals (NYSE:LZM) operates the Kabanga Nickel Project in Tanzania which is one of the largest and highest-grade nickel sulfide deposits in the world. On July 23, Lifezone Metals (NYSE:LZM) produced its first nickel, copper, and cobalt from the Kabanga nickel project and the metals were processed at the company’s Simulus laboratory in Australia during a pilot test of its refinery system.
According to a report by Precedence Research, the global nickel market was valued at $41.62 billion in 2024 and is expected to reach around $83.77 billion by 2034, expanding at a CAGR of 7.25%. Similarly, the cobalt industry is projected to grow at a CAGR of 6.00% from $17.80 billion in 2024 to $28.38 billion by 2032. The global market for nickel, copper, and cobalt is driven by the expanding demand for electric vehicles, renewable energy projects, and other technologies.
Lifezone Metals’ (NYSE:LZM) stake in the Kabanga Nickel Project in Tanzania and its proven refining capabilities make it strategically well-positioned to benefit from this rising demand for critical metals. The company’s pilot plant’s performance has exceeded expectations, the refinery, once operational, will serve as a critical hub for refining metals from the Kabanga Nickel Project.
While 18.45% of the company’s shares are shorted, 10 hedge funds have maintained a bullish sentiment on the stock as of the second quarter with stakes worth $32.60 million. Industry analysts maintain a consensus Buy rating, with an average price target of $14.33, representing almost 70% upside potential from its current levels.
While we acknowledge the potential of Lifezone Metals (NYSE:LZM) to grow, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than LZM but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: $30 Trillion Opportunity: 15 Best Humanoid Robot Stocks to Buy According to Morgan Stanley and Jim Cramer Says NVIDIA ‘Has Become A Wasteland’.
Disclosure. None. Insider Monkey focuses on uncovering the best investment ideas of hedge funds and investors. Please subscribe to our daily free newsletter to get the latest investment ideas from hedge funds’ investor letters by entering your email address below.
