In this article, we will talk about the 7 best high short-interest stocks to invest in.
What’s Going On in China?
China’s housing market, once a booming sector, has experienced a significant downturn in recent years. To revitalize the market, the government recently implemented a series of policy changes aimed at stimulating demand. These changes include easing home-buying restrictions in major cities like Guangzhou, Shenzhen, and Shanghai.
The relaxation of these restrictions has had a positive impact on the stock market. Investors, encouraged by the government’s efforts, have been pouring money into Chinese stocks, particularly those related to the real estate sector. This surge in investment has led to a significant increase in stock prices. The CSI 300 index saw its most significant weekly gain since 2008, rising over 15% in late September 2024
While all of this activity has had a positive short-term impact, economists believe that more measures are needed to address China’s weak domestic demand. The housing market is still grappling with concerns about developer solvency and the overall economic outlook. The government’s efforts to address these issues will be crucial for the long-term recovery of the housing market and the broader economy.
On September 27, Jeremy Siegel, Wharton School professor of finance, joined CNBC’s ‘Squawk on the Street’ to discuss how much of a game changer recent news from China is. He shared his insights on the potential implications of global market changes, particularly in light of discussions surrounding Japan and China.
Siegel agreed with hedge fund manager David Tepper’s views but noted a divergence regarding Japan’s long-term appreciation and its effects on exports and interest rates. He highlighted that, despite concerns, the recent performance of the Japanese yen and Nikkei, showing gains of 2% each, indicates that there may still be opportunities to capitalize on these markets.
He emphasized the positive developments in China, suggesting that buying into a market with a price-to-earnings ratio of around 10 can be advantageous, especially considering the current P/E ratio for China is approximately 12 to 13. He pointed out that this valuation is relatively low compared to other markets, with Brazil being one of the few markets with an even lower ratio. Siegel referenced Warren Buffett’s concept of “margin of safety” when investing in low P/E markets, reinforcing his belief in the potential for gains in China despite some bearish sentiments.
When asked about the US market, Siegel indicated that it appears full at present. He praised the Fed’s new trajectory and suggested that if they implement a quarter-point rate increase at each meeting, they could reach a target rate of around 3.5% by mid-2025. He argued that current inflation data supports this approach, although he expressed skepticism about reaching the Fed’s dot plot target of 2.9% without a recession.
Siegel believes that while inflation remains a concern, the Fed does not need to take drastic measures such as a 50 basis point hike. Instead, he advocates for a more gradual approach to rate increases, which would help stabilize the economy without causing significant harm. He noted that if the market anticipates these adjustments, the outlook for the remainder of the year could improve.
Overall, his analysis suggests that while opportunities exist in international markets like Japan and China, investors should remain cautious about US equities due to their current valuations. His perspective encourages a balanced approach to investing in various global markets while keeping an eye on macroeconomic indicators and central bank policies.
China’s recent stimulus measures have encouraged renewed investor interest in Chinese stocks. Short-term traders have been consistently purchasing stocks, and hedge funds have increased their allocations to Chinese equities. While the stimulus is positive, underlying economic challenges could affect investment strategies, including short-selling. In that context, we’re here with a list of the 7 best high short-interest stocks to invest in.
Methodology
To compile our list, we used the Finviz stock screener to find companies with a short interest between 10% and 25%. We then selected 10 stocks that were the most shorted but at the same time popular among elite hedge funds and that analysts were bullish on. The hedge fund data was sourced from Insider Monkey’s database which tracks the moves of over 900 elite money managers. The stocks are ranked in ascending order of their short interest.
Why are we interested in the stocks that hedge funds pile into? 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).
7 Best High Short Interest Stocks To Invest In
7. CAVA Group Inc. (NYSE:CAVA)
Short % of Float As of September 13: 15.13%
Market Capitalization as of September 30: $14.15 billion
Number of Hedge Fund Holders: 33
CAVA Group Inc. (NYSE:CAVA) operates a category-defining Mediterranean fast-casual restaurant brand operating in ~25 states in the US. Its specialty is offering a variety of healthy and flavorful options, including salads, bowls, and pita sandwiches, with a commitment to high-quality ingredients and exceptional customer service that has contributed to its rapid growth and success.
The company continued its rapid growth in the US, adding 18 new restaurants during Q2, bringing the total restaurant count to 341. It’s also on track to open an additional 54-57 restaurants by the end of 2024. This expansion, combined with strong same-store sales, led to a 35% year-over-year increase in overall revenue. Same-restaurant sales increased by 14.4%, driven by a 9.5% increase in guest traffic and a 4.9% increase in menu price and product mix.
Its expansion into Chicago has been a major success, with 3 locations now open. The recent launch of grilled steak has been a hit with customers and is driving sales. The social media campaign for the launch generated over 8.6 million social impressions and over 300 million PR impressions.
On September 18, Kind Snacks founder Daniel Lubetzky joined the judging panel on Shark Tank. In an interview, he discussed his new role, his views on the food industry, and his investment in CAVA Group Inc. (NYSE:CAVA). Despite the challenges posed by inflation, Lubetzky remains optimistic about this company’s future due to its strong product and growth potential. CAVA Group Inc.’s (NYSE:CAVA) strategic focus on customer loyalty, operational efficiency, and team development positions it for continued growth and success.
Next Century Growth Small Cap Strategy stated the following regarding CAVA Group, Inc. (NYSE:CAVA) in its first quarter 2024 investor letter:
“CAVA Group, Inc. (NYSE:CAVA) is a fast casual restaurant chain serving authentic Mediterranean cuisine, featuring customizable bowls and pitas. CAVA currently owns and operates >300 stores, and the company targets a 15% plus new store growth rate. The intermediate goal is to have 1,000 stores by 2032 with plenty of opportunity to grow beyond that level. The company already delivers solid restaurant level margins >20% and they believe 3-5% same store sales growth is achievable over time. As the business matures, they should be able to leverage G&A expense which should lead to strong earnings growth over many years.”
6. Aptiv (NYSE:APTV)
Short % of Float As of September 13: 15.61%
Market Capitalization as of September 30: $19.73 billion
Number of Hedge Fund Holders: 38
Aptiv (NYSE:APTV) is an Irish-American automotive technology supplier at the forefront of the automotive industry that specializes in developing safer, greener, and more connected technologies. Offerings include advanced safety systems, electrification components, and autonomous driving solutions.
The company is benefiting from the growing demand for electric and connected vehicles because of its advanced driver assistance systems, like the Gen 6 ADAS platform. Despite a 2.87% year-over-year decrease in revenue, Aptiv (NYSE:APTV) reported record-high profits of $1.16 billion in Q2 2024. This made a revenue of $5.05 billion for the quarter. The earnings per share beat estimates by $0.16 and came out to be $1.58.
Key customers like a European truck and SUV manufacturer, a global EV maker, and two Chinese OEMs, reduced their production volumes, leading to lower revenue. Signal Power revenue declined 3%, primarily due to lower production volumes at select customers.
Revenue grew 16% in China, offsetting negative impacts from other regions. The company’s ASUX segment achieved record quarterly revenue and earnings, driven by growth in active safety products (up 15% year-over-year).
On August 13, the company expanded its manufacturing facility in Chennai, India. The plant will produce advanced cockpit control systems, increasing production capacity and supplying high-quality components to Indian and global automakers. This expansion solidifies its position as a key automotive partner in India and drives innovation in the fast-growing market.
With the expanded plant, it can produce advanced safety and user experience features, such as radars, cameras, and next-generation electronic control units, helping the company stay competitive in the growing market for software-defined vehicles. Such factors collectively set Aptiv (NYSE:APTV) up for growth potential in the industry.
TimesSquare Capital U.S. Mid Cap Growth Strategy stated the following regarding Aptiv PLC (NYSE:APTV) in its first quarter 2024 investor letter:
“At the beginning of the year, we sold our shares in Aptiv PLC (NYSE:APTV), which supplies automotive electronic technology for safety and entertainment systems. The company had expected significant growth from its EV components, though that segment saw much slower growth recently. With no line of sight for a rebound, we exited our position.”
5. International Paper Co. (NYSE:IP)
Short % of Float As of September 13: 16.11%
Market Capitalization as of September 30: $17.04 billion
Number of Hedge Fund Holders: 44
International Paper Co. (NYSE:IP) is the world’s largest pulp and paper company, operating in numerous countries and serving a diverse customer base. Its products are used in a range of applications, including packaging for consumer goods, industrial products, and printing and writing papers, with a commitment to sustainability and environmental stewardship.
The company made $4.73 billion in Q2 2024 revenue, which, despite being lower than Street estimates, ended up improving 1.11% from a year-ago period. This was driven by improved pricing and mix, along with higher export and mix benefits. Its Industrial Packaging segment saw growth due to higher prices and favorable market conditions, while the Global Cellulose Fiber segment remained relatively stable despite some fluctuations in product demand.
The company has seen a decline in investor interest following the failure of a potential acquisition by Suzano. Investors had been anticipating a significant premium from the deal, but International Paper Co. (NYSE:IP) chose to remain independent rather than consolidate.
At the same time, it is in the process of acquiring DS Smith, a UK-based packaging company. This acquisition is anticipated to create significant value for shareholders by enhancing its operational capabilities and expanding its market presence.
CEO Andy Silvernail also introduced an 80/20 business process aimed at enhancing the company’s operational efficiency. This approach focuses on identifying and prioritizing the most profitable segments of their portfolio while optimizing costs and improving customer relations.
The company has a promising future, despite challenges. International Paper Co. (NYSE:IP) possesses a strong foundation, including a talented team, a rich history, and a significant opportunity for growth. By implementing a strategic approach focused on customer-driven strategies, cost optimization, and team alignment, it can achieve long-term success.
Diamond Hill Select Strategy stated the following regarding International Paper Company (NYSE:IP) in its Q2 2024 investor letter:
“Other top individual contributors in the quarter included Coherent and new holding International Paper Company (NYSE:IP). International Paper is one of the US’s largest manufacturers of containerboards, which is used to make corrugated boxes and other packaging materials. We expect that as the demand environment improves and the company focuses on its commercial execution, it will be able to improve profitability and bring operating margins back to normalized levels. Given what we view as an attractive valuation for a high-quality company, we capitalized on the opportunity to initiate a position in Q2. Shares subsequently rallied after reports that Brazilian company Suzano is interested in acquiring the company.”
4. U-Haul Holding Co. (NYSE:UHAL)
Short % of Float As of September 13: 16.72%
Market Capitalization as of September 30: $15.27 billion
Number of Hedge Fund Holders: 20
U-Haul Holding Co. (NYSE:UHAL) is a moving truck, trailer, and self-storage rental company that is known for its convenient locations, competitive pricing, and comprehensive moving solutions. Its focus on customer satisfaction and operational efficiency has contributed to its long-standing success in the moving and storage industry.
During FQ1 2025, the company expanded its storage capacity by adding 17 new locations totaling 1.7 million net rentable square feet. 8 of these locations were acquired from existing storage facilities (0.4 million square feet), while 9 were developed internally. Additionally, expansion projects at existing facilities contributed to the remaining 1.3 million square feet of net rentable space. There are still ~16.9 million net rentable square feet in development or pending.
In August, it announced plans to build a new state-of-the-art retail, moving, and self-storage center in Grand Chute, Wisconsin. The facility will provide various services, including climate-controlled storage, moving supplies, and U-Haul Truck Share 24/7. Construction is expected to be completed by summer 2026, and this center will mark the company’s 50th owned-and-operated store in Wisconsin.
Revenue for the first quarter of fiscal 2025 was $1.55 billion, up 0.53% year-over-year. Self-storage revenues increased 8.4%. Self-moving equipment rental revenues increased by 1.5%, marking the first year-over-year improvement in 8 quarters. Moving and Storage Other Revenue increased or 7.3% due to the growth of U-Box product offering.
U-Haul Holding Co.’s (NYSE:UHAL) generous offer of free storage during Hurricane Helene, as announced on September 28, demonstrates the company’s commitment to community support in times of crisis. This initiative not only provides essential assistance to those affected by the storm but also highlights its dedication to helping people during challenging times. Such actions strengthen its reputation, setting it up for growth.
3. Williams-Sonoma Inc. (NYSE:WSM)
Short % of Float As of September 13: 16.88%
Market Capitalization as of September 30: $19.5 billion
Number of Hedge Fund Holders: 39
Williams-Sonoma Inc. (NYSE:WSM) is a consumer retail company that sells kitchenware and home furnishings and operates a portfolio of well-known brands, including Williams Sonoma, Pottery Barn, West Elm, and Rejuvenation. It’s known for its curated selection of products, expert customer service, and commitment to quality.
The company has embraced augmented reality technology to enhance its online shopping experience. Its new Design Crew Room Planner allows customers to virtually place furniture in their own spaces.
Management reported a slowdown in sales due to a slower housing market, which is negatively impacting demand for home products. Overall, the revenue for FQ2 2025 was down 3.99% year-over-year.
Pottery Barn’s sales declined by 7.1%, but there were positive trends in coastal decorating, entertaining, and seasonal holiday products. The Pottery Barn Children’s Business improved by 1.5%. West Elm again declined by 4.8%, while the Williams-Sonoma brand was down 0.8%.
The B2B business continues to expand, with strong growth in contracts (21.6%) and trade (7.1%). The company secured notable wins in the hospitality sector, including Sheraton Boston, Hilton Beverly Hills, and Renaissance Las Vegas. It launched a new partnership with IHG’s Hotel Indigo brand and is growing its presence in the multifamily space with partnerships like Korman Communities and Discovery Land Company.
Despite a decline in comparable sales, the company exceeded profitability expectations in the second fiscal quarter. The operating margin reached 16.2%, and earnings per share were $1.74, reflecting the recent 2-for-1 stock split.
The company’s strategic focus on innovation, customer experience, and margin improvement has positioned it for continued success. Management is confident in its ability to navigate the market and deliver sustainable growth, driven by Williams-Sonoma Inc.’s (NYSE:WSM) strong foundation and commitment to excellence.
ClearBridge Sustainability Leaders Strategy made the following comment about Williams-Sonoma, Inc. (NYSE:WSM) in its Q3 2023 investor letter:
“In a strong showing for the Strategy’s consumer discretionary holdings, Williams-Sonoma, Inc. (NYSE:WSM), which sells kitchenware and home furnishings, was the top contributor in the quarter after its August earnings report showed exceptional profitability and the company raised its full-year guidance. Shares jumped further in September after a private equity firm increased its stake, suggesting recent weakness was overdone. The company’s high-quality fundamentals make it a good defensive fit for an uncertain environment: it generates significant free cash flows, has no debt and the liquidity to invest in the business first and then return excess to shareholders.”
2. Summit Therapeutics Inc. (NASDAQ:SMMT)
Short % of Float As of September 13: 17.83%
Market Capitalization as of September 30: $15.13 billion
Number of Hedge Fund Holders: 17
Summit Therapeutics Inc. (NASDAQ:SMMT) is a biopharmaceutical oncology company focused on developing novel therapies for rare genetic diseases. Its pipeline includes potential treatments for rare neuromuscular disorders and other genetic conditions. The company’s lead candidate, ivonescimab, has shown promising results in clinical trials for non-small cell lung cancer (NSCLC).
Its partnership with Akeso, a well-established Chinese biotech, significantly reduces development risks. Together they conducted two successful Phase 3 clinical trials, HARMONi-A and HARMONi-2, for ivonescimab in non-small cell lung cancer, yielding positive data. Hence Akeso’s experience and expertise contribute to the advancement of ivonescimab. The company also announced a 5-year strategic collaboration with MD Anderson to accelerate ivonescimab’s development.
Currently, there are 20 ongoing clinical trials evaluating ivonescimab for various cancer types. While the current Phase 3 programs focus on non-small cell lung cancer, 7 trials are exploring its potential in other solid tumors. Early-stage clinical trials have demonstrated the efficacy of ivonescimab in treating NSCLC. The positive data from these trials provide strong evidence for the drug’s potential.
The company’s strong financial position allows it to allocate resources for ongoing development efforts, with a solid cash balance to support its operations. Research and development (R&D) expenses remained stable in the second quarter. However, acquired IP R&D expenses increased due to a licensing agreement amendment. Operating expenses remained consistent.
Overall, Overall, Summit Therapeutics Inc. (NASDAQ:SMMT) appears to be a promising investment opportunity. The company’s strong pipeline, strategic partnerships, and positive clinical data-position it for potential future growth. However, investors should carefully evaluate the risks associated with early-stage biotech companies.
1. Super Micro Computer Inc. (NASDAQ:SMCI)
Short % of Float As of September 13: 19.52%
Market Capitalization as of September 30: $24.58 billion
Number of Hedge Fund Holders: 47
Super Micro Computer Inc. (NASDAQ:SMCI) is a leading provider of high-performance computing and storage solutions that designs and manufactures a range of server systems, workstations, and storage products, catering to various industries including cloud computing, data centers, and enterprise applications. It is known for its innovative technology, energy efficiency, and customization capabilities.
The company operates in over 100 countries and has experienced significant growth in recent years, driven by its expansion in Asia and focus on value-added AI solutions. Its innovative products, including liquid cooling clusters and next-generation X14 and H14 systems, have been crucial in supporting the growth of AI. The company’s revenue and profitability have significantly increased over the past three years, largely driven by the rising demand for AI solutions.
It grew its revenue by 142.95% in FQ4 2024 as compared to the year-ago period, amounting to a total revenue of $5.31 billion. The revenue for the fiscal year 2024 reached $14.94 billion, a remarkable 110% increase year-over-year. The earnings per share for the fourth fiscal quarter were $6.25, missing Street estimates by $1.89. Management has speeded up its production and is now producing 5,000 racks and over 2,000 direct liquid cooling racks per month.
It recently introduced new servers powered by Intel’s Xeon processors. These servers feature advanced architectures, including 10U and multi-node form factors, to support next-generation GPUs and higher CPU core densities. The servers also offer improved memory configurations and liquid cooling solutions, enabling the company to provide customized solutions for its customers.
Despite recent challenges, the company remains a promising investment opportunity. Its strong fundamentals, innovative solutions, and growth potential in the AI server market position it for long-term success.
Carillon Scout Mid Cap Fund stated the following regarding Super Micro Computer, Inc. (NASDAQ:SMCI) in its Q2 2024 investor letter:
“Super Micro Computer, Inc. (NASDAQ:SMCI) was the top detractor to returns in the second quarter. Super Micro designs and manufacturers server solutions based on modular and open-standard architecture. This modular approach combined with a strong engineering culture helps the company to supply the market with advanced servers and rack-scale compute solutions quickly. After an impressive return in the first quarter, the company offered disappointing near-term earnings guidance, though we do not believe its long-term opportunity has diminished. We expect continued strong growth for several years, although the range of outcomes is quite wide; it is difficult to forecast AI server market growth with precision.”
While we acknowledge the growth potential of Super Micro Computer Inc. (NASDAQ:SMCI), our conviction lies in the belief that AI stocks hold great promise for delivering high returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than SMCI but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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