10 Worst Booming Stocks to Buy According to Short Sellers

3. MicroStrategy Incorporated (NASDAQ:MSTR)

Year-to-Date Performance as of September 14: 106.5%

Short % of Shares Outstanding as of September 14: 13.7%

Number of Hedge Fund Holders: 26

MicroStrategy Incorporated (NASDAQ:MSTR) is an application software company based in Tysons Corner, Virginia. It offers AI-powered enterprise analytics software and services.

Recently, AI stocks have been having a tough time in the market, a trend that seems to have put many investors off when it comes to riskier AI players like MicroStrategy Incorporated (NASDAQ:MSTR). However, this company does have impressive growth potential, especially considering the fact that it has been posting immense returns ever since it began acquiring Bitcoin. In terms of returns, MicroStrategy Incorporated (NASDAQ:MSTR) seems to be second only to Nvidia.

Despite this, the Bitcoin spending spree has turned out to be a double-edged sword for MicroStrategy Incorporated (NASDAQ:MSTR). Before it began buying up the cryptocurrency, it had about $531 million in net cash – a position that has since worsened into net debt of $3.8 billion as of the second quarter. This quarter, MicroStrategy Incorporated (NASDAQ:MSTR) also saw its revenue fall by 7% year-over-year, while support revenues declined by 40%.

Considering these figures, many may consider the position that short sellers have taken relative to MicroStrategy Incorporated (NASDAQ:MSTR) to be correct. However, several institutional investors and hedge funds disagree, and continue to hold large stakes in this company even today.

A total of 26 hedge funds were long MicroStrategy Incorporated (NASDAQ:MSTR) in the second quarter, with a total stake value of $442.2 million.

Artisan Partners mentioned MicroStrategy Incorporated (NASDAQ:MSTR) in its second-quarter 2024 investor letter:

“Regarding MicroStrategy Incorporated (NASDAQ:MSTR), our decision to avoid this company comes down to a lack of conviction in its franchise characteristics. The stock has worked this year due to a rebound in the price of bitcoin. Since 2020, MicroStrategy has been focused on converting its cash and cash equivalent holdings, as well as issuing debt, to fund the purchase of bitcoin, which now makes up most of the company’s value.”