In this article, we will discuss the 15 most shorted stocks hedge funds are buying. You can skip our detailed overview and go directly to the 5 Most Shorted Stocks Hedge Funds Are Buying.
The year 2022 has been a dynamic year for financial markets worldwide. The equity markets have come under selling pressure across the world as investors flock to safe assets amidst a volatile macro-environment. The positioning in treasury bonds and fixed-income assets has increased significantly this year as the yields have continued to go up, with the FED continuing to raise interest rates.
In the stock market, the short sellers have been on the winning side as the S&P 500 declined by 20% YTD. Short selling, also known as shorting or going short, is a trading strategy that involves borrowing and then selling securities to profit from the price of the stock going down. To execute a short sale, an investor borrows the security from a broker and sells it on the market. If the price of the security declines, the investor can buy it back at a lower price, return it to the broker, and pocket the difference as profit. If the price goes up, the investor must buy the security at a higher price and will incur a loss.
Although a net short position on the market has been profitable in 2022, there are many stocks that generated positive returns for investors in 2022, particularly in the energy sector, with stocks like Exxon Mobil Corporation (NYSE:XOM) and Occidental Petroleum Corporation (NYSE:OXY). Hence, short sellers have to be extremely careful in picking the right stock to be shorted; otherwise, they can be deep under the water if the price of the stock goes up.
There are plenty of companies out there in the market which generates conflicting opinions amongst investors with many believing in the bullish narrative around the stock while others remain bearish. In this article, we have discussed 15 most shorted stocks hedge funds are buying; these are essentially battleground stocks given the highly opposing narratives present in the market with high short-interest and high hedge fund holdings at the same time.
Our Methodology
We obtained the list of 50 most shorted stocks from Yahoo Finance and then ranked these stocks using Insider Monkey’s proprietary hedge fund sentiment data.
The high short interest and high hedge fund sentiment indicate that these are battleground stocks. A lot of hedge funds believe these companies are going to decline substantially. At the same time, there are a lot of hedge funds that believe the opposite.
15 Most Shorted Stocks Hedge Funds Are Buying
15. bluebird bio, Inc. (NASDAQ:BLUE)
Short % of Float (Nov 29, 2022): 29.45%
Number of Hedge Fund Holders: 22
Bluebird bio, Inc. (NASDAQ:BLUE) is a biotechnology company that focuses on the development of gene therapies for serious genetic diseases. The company was founded in 1992 and is headquartered in Cambridge, Massachusetts. Bluebird’s therapies are designed to modify or replace diseased genes with functional copies in order to treat diseases at their genetic root cause. The company’s pipeline includes a number of potential therapies for genetic conditions such as sickle cell disease, beta-thalassemia, and cerebral adrenoleukodystrophy (CALD).
Matthew Harrison, an analyst at Morgan Stanley, keeps an Underweight rating on bluebird bio, Inc. (NASDAQ:BLUE) with a price target of $3. Despite the removal of the partial clinical hold by the FDA, the analyst has a bearish view of the company as he awaits updates on the enrollment progress of the patients. On the other hand, the bullish narrative around the company is premised upon the FDA approvals of beti-cel and eli-cel that could generate over $100 million each.
As per Insider Monkey’s database, 22 hedge funds owned stakes in bluebird bio, Inc. (NASDAQ:BLUE) at the end of the third quarter. Tang Capital Management remained the leading stakeholder of the company at the end of Q3 2022.
In addition to bluebird bio, Inc. (NASDAQ:BLUE), Voya Financial, Inc. (NYSE:VOYA), Gossamer Bio, Inc. (NASDAQ:GOSS) and Carvana Co. (NYSE:CVNA) are included in our list of 15 most shorted stocks hedge funds are buying.
14. Camping World Holdings, Inc. (NYSE:CWH)
Short % of Float (Nov 29, 2022): 24.94%
Number of Hedge Fund Holders: 22
Camping World Holdings, Inc. (NYSE:CWH) operates a network of recreational vehicle (RV) dealerships and related businesses in the United States. In addition to its RV dealership network, Camping World also operates retail stores that sell camping and outdoor gear, and it provides financing, insurance, and other services to RV owners.
Camping World Holdings, Inc. (NYSE:CWH) currently suffers from declining margins due to its unfavorable price mix, which may be a reason for the high short interest in the stock. However, Camping World Holdings, Inc. (NYSE:CWH) has continued to enhance its capacity, which may make the stock appealing once the market starts recovering.
According to Insider Monkey’s database, 22 hedge funds owned stakes in the company at the end of the September quarter. Abrams Capital Management held the biggest stake in Camping World Holdings, Inc. (NYSE:CWH) at the end of Q3 2022.
13. iRobot Corporation (NASDAQ:IRBT)
Short % of Float (Nov 29, 2022): 29.46%
Number of Hedge Fund Holders: 23
iRobot Corporation (NASDAQ:IRBT) is a leading global consumer robotics company that designs and manufactures robots for household, military, and industrial use. The company’s Roomba robots use advanced sensors and algorithms to navigate around a room and clean floors automatically, making household chores easier and more efficient. These robots are used for a variety of applications, including bomb disposal, telepresence for remote inspection and maintenance tasks, and mine clearance.
iRobot Corporation (NASDAQ:IRBT) is currently trading at a discounted price to Amazon’s acquisition price of $61 per share, which makes it an appealing stock for hedge funds who believe the deal would go through. However, the short interest in the stock remains high as many believe that the deal won’t go through since there are many factors that will be apprehended by regulators.
As per Insider Monkey’s database, 23 funds remained bullish on the company at the end of Q3 2022. Magnetar Capital had the biggest long position on the company’s shares at the end of the third quarter.
12. Reata Pharmaceuticals, Inc. (NASDAQ:RETA)
Short % of Float (Nov 29, 2022): 38.84%
Number of Hedge Fund Holders: 25
Headquartered in Irving, Texas, Reata Pharmaceuticals, Inc. (NASDAQ:RETA) is a clinical-stage biopharmaceutical company that develops and commercializes innovative therapies for serious or life-threatening diseases. Reata Pharmaceuticals, Inc. (NASDAQ:RETA) has a number of drug candidates in its pipeline, including treatments for autoimmune and inflammatory diseases, neurodegenerative diseases, and rare genetic disorders.
Carter Gould, an analyst at Barclays, keeps an Overweight rating on Reata Pharmaceuticals, Inc. (NASDAQ:RETA) with a price target of $50. The analyst is optimistic about the company after an encouraging Q3 2022 result. However, some analysts remain bearish on the stock citing a weak future for the company’s treatments.
At the end of Q3 2022, 25 hedge funds in Insider Monkey’s database were long Reata Pharmaceuticals, Inc. (NASDAQ:RETA). Point72 Asset Management remained the leading stakeholder of the company at the end of Q3 2022.
11. Sunnova Energy International Inc. (NYSE:NOVA)
Short % of Float (Nov 29, 2022): 26.36%
Number of Hedge Fund Holders: 25
Founded in 2012, Sunnova Energy International Inc. (NYSE:NOVA) operates as a residential solar service provider, offering customers the option to purchase or lease solar panels and energy storage systems. The company has a network of local installers that provide installation and maintenance services to customers.
Ryan Levine, an analyst at Citi, keeps a Buy rating on Sunnova Energy International Inc. (NYSE:NOVA) with a price target of $26. The analyst is optimistic about the company’s growth due to several factors, including the increasing utility bills and the Inflation Reduction Act that supports the solar industry. However, Sunnova Energy International Inc. (NYSE:NOVA) operates in net loss, and the negative free cashflow in a rising interest rate environment provides ground for the high short interest in the stock.
As per Insider Monkey’s database, 25 hedge funds had stakes in Sunnova Energy International Inc. (NYSE:NOVA) at the end of the third quarter. Moore Global Investments remained the leading stakeholder in the company at the end of Q3 2022.
Here is what ClearBridge Investments Small Cap Strategy has to say about Sunnova Energy International Inc. (NYSE:NOVA) in its Q3 2022 investor letter:
Within the utilities sector, solar power and energy storage company Sunnova (NYSE:NOVA) saw its share price benefit from passage of the Inflation Reduction Act legislation, which includes an array of new and extended tax credits that should not only support but enhance the company’s long-term growth prospects.
10. Heron Therapeutics, Inc. (NASDAQ:HRTX)
Short % of Float (Nov 29, 2022): 30.09%
Number of Hedge Fund Holders: 27
Heron Therapeutics, Inc. (NASDAQ:HRTX) is a biotechnology company that develops and commercializes innovative treatments for chronic pain and cancer-supportive care. Heron Therapeutics, Inc. (NASDAQ:HRTX) has a number of drug candidates in its pipeline, including treatments for post-surgical pain, chemotherapy-induced peripheral neuropathy, and other chronic pain conditions. The company’s lead product, SUSTOL, is a long-acting injectable formulation of the anti-nausea drug that is used to prevent chemotherapy-induced nausea and vomiting.
Heron Therapeutics, Inc. (NASDAQ:HRTX) has two established FDA-approved therapies which generate recurring sales for the company. However, the company has been incurring excessive losses of late, which makes it a highly risky company and explains the high-short interest in the stock.
27 hedge funds were long on the company’s stock at the end of the third quarter, according to Insider Monkey’s database. Deep Track Capital had the biggest long position in the company at the end of Q3 2022.
9. Cowen Inc. (NASDAQ:COWN)
Short % of Float (Nov 29, 2022): 23.97%
Number of Hedge Fund Holders: 27
Founded in 1918, Cowen Inc. (NASDAQ:COWN) provides a range of financial products and services to clients around the world. Cowen has a number of divisions, including investment banking, equity research, sales and trading, and asset management.
Cowen Inc. (NASDAQ:COWN) has managed to achieve double-digit EBITDA growth in recent years, managing to outperform industry peers. The stock is up 7.4% YTD, and it is currently overvalued, trading at a forward P/E of 15.7 compared with the sector median of 10.5, which may be a reason for the high short interest in the stock.
According to Insider Monkey’s database, 27 hedge funds owned stakes in the company at the end of the September quarter. Magnetar Capital held the biggest stake in Cowen Inc. (NASDAQ:COWN) at the end of Q3 2022.
8. Silvergate Capital Corporation (NYSE:SI)
Short % of Float (Nov 29, 2022): 35.69%
Number of Hedge Fund Holders: 27
Silvergate Capital Corporation (NYSE:SI) is a financial services company that provides banking and related services to clients in the cryptocurrency and digital currency industries. The company has a network of correspondent banks that enables it to provide services to clients in countries around the world.
George Sutton, an analyst at Craig-Hallium, keeps a Buy rating on Silvergate Capital Corporation (NYSE:SI) with a price target of $36. Despite the murky visibility into the profitability of the fourth quarter of 2023 and believes that the company is more sustainable than the market perceives based on how the balance sheet is structured. Whereas, Manan Gosalia, an analyst at Morgan Stanley, downgraded the company’s rating to Underweight with a price target of $24. The analyst has a bearish view as he believes that the company will face funding pressure in the future.
As per Insider Monkey’s database, 27 hedge funds remained bullish on Silvergate Capital Corporation (NYSE:SI) at the end of Q3 2022. Marshall Wace LLP came out to be the biggest holder of the company’s shares at the end of the quarter.
TimesSquare Capital made the following comment about Silvergate Capital Corporation (NYSE:SI) in its Q3 2022 investor letter:
Rotating back to positive were the shares of Silvergate Capital Corporation (NYSE:SI). Providing financial infrastructure solutions and services for the digital currency industry, Silvergate reported improvements in net interest income from deposit growth and lower expenses, that combined to produce better-than-expected earnings. After a difficult spring, Silvergate bounced back by 40% this quarter and we trimmed our holdings.
7. Allogene Therapeutics, Inc. (NASDAQ:ALLO)
Short % of Float (Nov 29, 2022): 33.78%
Number of Hedge Fund Holders: 28
Allogene Therapeutics, Inc. (NASDAQ:ALLO) is a clinical-stage biotechnology company that develops allogeneic cell therapies for the treatment of cancer. Allogene Therapeutics, Inc. (NASDAQ:ALLO) main focus is on developing therapies that use allogeneic T cells, which are immune cells that can be obtained from healthy donors and used to treat cancer patients. The company’s lead product candidate, ALLO-715, is a CAR T-cell therapy that is being developed for the treatment of multiple myeloma, a type of blood cancer.
Debjit Chattopadhyay, an analyst at H.C. Wainwright, keeps a Buy rating on Allogene Therapeutics, Inc. (NASDAQ:ALLO) with a price target of $29 after the company reported strong results for Q3 2022. On the other hand, Jason Gerberry, an analyst at BofA, recently downgraded the company’s rating to Underperform with a price target of $9. The bearish view of the analyst is premised on lower peak BCMA sales amounting to $500 million in the quarter from $1.7 billion previously.
At the end of Q3 2022, 28 hedge funds in Insider Monkey’s database were long Allogene Therapeutics, Inc. (NASDAQ:ALLO). Woodline Partners remained the leading stakeholder of the company at the end of Q3 2022.
6. The Beauty Health Company (NASDAQ:SKIN)
Short % of Float (Nov 29, 2022): 40.97%
Number of Hedge Fund Holders: 28
The Beauty Health Company (NASDAQ:SKIN) operates as a beauty health firm. The company specializes in introducing innovative products in the health & beauty categories. HydraFacial, the company’s main brand, is a non-invasive, approachable aesthetic health platform and ecosystem with a strong network of estheticians, customers, and partners, integrating medical and consumer retail to democratize and customize skin care treatments for the masses.
Korinne Wolfmeyer, an analyst at Piper Sandler, keeps an Overweight rating on The Beauty Health Company (NASDAQ:SKIN) with a price target of $15. The analyst is optimistic about the company’s 2023 outlook despite indications of declining demand from the macro environment.
The Beauty Health Company (NASDAQ:SKIN) faces intense competition from bigger peers in the industry like HydraFacial, which may be a reason for the high-short interest in the stock.
Here is what Baron Funds has to say about The Beauty Health Company (NASDAQ:SKIN) in its Q3 2021 investor letter:
The Beauty Health Company is an innovative skin care and aesthetics company providing consumers the benefits of a professional medical treatment with the experience of a consumer brand. Shares outperformed in the third quarter following better-than-expected earnings results and the announcement of two new retail partnerships with Nordstrom and Ulta, where the company expects to sell an aesthetics device that customers can use in their home. We continue to be attracted to the company’s asset light, recurring revenue business model and see the company doubling its revenues organically over the next few years. We also believe that Beauty Health will boost shareholder value over time through accretive acquisitions.
According to Insider Monkey’s database, 28 hedge funds had stakes in The Beauty Health Company (NASDAQ:SKIN) at the end of the September quarter. Luxor Capital Group remained the leading stakeholder of the company at the end of the third quarter.
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Disclosure: None. 15 Most Shorted Stocks Hedge Funds Are Buying is originally published on Insider Monkey.
