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High Short Interest Stocks

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Re: High Short Interest Stocks

#141

Post by dcolkitt »

dclowd9901 wrote: post #124
dcolkitt wrote: post #108

Fair warning. Buying stocks with high short interest is, over the long run, a terrible investment strategy. Mountains of academic research has consistently found the most heavily shorted stocks to significantly underperform the market[1] (to the order of 10% per year). Heavily shorted stocks tend to be the companies with the most negative cash flow shocks[2], low quality earnings statements[3], negative earnings revi…

Is it not also possible that the shorting itself influences the direction of the stock/performance of the company? I'm not sure you can make a statement like you're making. There, to me, is not a direct cause/effect relationship here.

How would short selling cause a company's next quarterly earnings to be disappointing?

Re: High Short Interest Stocks

#142

Post by dcolkitt »

optimiz3 wrote: post #123
dcolkitt wrote: post #108

Fair warning. Buying stocks with high short interest is, over the long run, a terrible investment strategy. Mountains of academic research has consistently found the most heavily shorted stocks to significantly underperform the market[1] (to the order of 10% per year). Heavily shorted stocks tend to be the companies with the most negative cash flow shocks[2], low quality earnings statements[3], negative earnings revi…

Works until it doesn't. Exhibit TSLA.

I'm old enough to remember people saying the exact same thing in 1999. The four most dangerous words in investing are: "This time is different"

Re: High Short Interest Stocks

#143

Post by MattGaiser »

dclowd9901 wrote: post #124
dcolkitt wrote: post #108

Fair warning. Buying stocks with high short interest is, over the long run, a terrible investment strategy. Mountains of academic research has consistently found the most heavily shorted stocks to significantly underperform the market[1] (to the order of 10% per year). Heavily shorted stocks tend to be the companies with the most negative cash flow shocks[2], low quality earnings statements[3], negative earnings revi…

Is it not also possible that the shorting itself influences the direction of the stock/performance of the company? I'm not sure you can make a statement like you're making. There, to me, is not a direct cause/effect relationship here.

It influences the direction of the stock price perhaps, but why the fundamentals?

Re: High Short Interest Stocks

#144

Post by njanirudh »

Triv888 wrote: post #139
lxbky wrote: post #138

Earlier quoted context omitted.

[deleted]

Don't put all of your eggs in the same basket. I have no clue how anyone, especially edge funds, could get majorly impacted by just one stock moving the wrong way. I have stocks in my portfolio that move 25 to 50% the wrong way almost everyday and I still get about 1% overall gain daily in this bull market (which is probably not great in this economy).

Because you don't get 10 or 100x leverage like hft guys get.

Re: High Short Interest Stocks

#145

Post by mike00632 »

option wrote: post #134
mike00632 wrote: post #128

Earlier quoted context omitted.

Give it a few years. I'm still skeptical that Tesla should be worth more than all the other auto companies combined.

In addition to making cars people want, Tesla also makes their own software, chips for AI inference and training, batteries, charging network, home energy solutions (solar+ battery). All of these not just related products but a cohesive strategy with sum much equal to its parts. Which other automaker does that? Edit: Having said that, I bought them long ago at their IPO price and sold long ago when they were around 3…

I agree. I even own Tesla stock. But Tesla

1) still has a lot of scaling to get through before they reach anything close to the sales volume of their competition. Elon talks a lot about scaling but Tesla is still microscopic compared to other manufacturers. The business operations of a much larger company will present challenges in communication, structure, quality assurance, legal liabilities in various jurisdictions, not to mention the struggle of sourcing battery components. Tesla scaling is not as easy as spinning up additional Kubernetes pods.

2) The competition WILL electrify. Tesla is not likely to have more than 6 models in the coming years yet they will compete with hundreds of models from different companies that cater to different niches. Any company that offers an electric vehicle with physical buttons instead of a touchscreen has my attention.

3) Tesla workers will unionize and/or mature away from the company. I grew up around Detroit and witnessed a lot of labor dynamics with the UAW. Assuming Tesla succeeds in preventing a union the workers will eventually cash out their stock and leave for better offers at other automotive companies or spin off their services into tier automotive groups. Why write software for Tesla robots when the robot company will hire you to write software for all auto companies?

Re: High Short Interest Stocks

#146

Post by [deleted] »

Triv888 wrote: post #139
lxbky wrote: post #138

Earlier quoted context omitted.

[deleted]

Don't put all of your eggs in the same basket. I have no clue how anyone, especially edge funds, could get majorly impacted by just one stock moving the wrong way. I have stocks in my portfolio that move 25 to 50% the wrong way almost everyday and I still get about 1% overall gain daily in this bull market (which is probably not great in this economy).

[deleted]

Re: High Short Interest Stocks

#147

Post by ngngngng »

dcolkitt wrote: post #142
optimiz3 wrote: post #123

Earlier quoted context omitted.

Works until it doesn't. Exhibit TSLA.

I'm old enough to remember people saying the exact same thing in 1999. The four most dangerous words in investing are: "This time is different"

I'm fairly confident it's going to be a while before a stock is shorted over 100% again, barring some big regulatory overreach. As soon as it happens, we'll meme it again.

Re: High Short Interest Stocks

#148

Post by vga805 »

tinyhouse wrote: post #75
plaidfuji wrote: post #24

Earlier quoted context omitted.

The current candidates being floated by WSB are Nokia, AMC, Ericsson and Blackberry. Even though Virgin Galactic is second on this list, my impression of the WSB crowd is that they look for companies that are both high-short-interest and some nostalgic notion of being “worthy of saving”... Virgin would probably not fit their MO given the high-profile billionaire owner...

Nokia and Ericsson are not highly shorted. Nokia short ratio is less than 1%. I have no idea why WSB picked them. Also, both companies' market cap is greater than 20B so it's not easy to manipulate the stock price to the GME levels.

They convinced themselves that Nokia and Ericsson are doing big things with 5G.

Re: High Short Interest Stocks

#149

Post by themihai »

GameStop Corp. NYSE 138.08% interest rate.

And people wonder why hedge fund managers with short positions on GME are scared by the squeeze! They will do everything they can to stop retailers buying GME. They got caught naked!

Re: High Short Interest Stocks

#150

Post by potsandpans »

ls612 wrote: post #111
ceh123 wrote: post #87

Earlier quoted context omitted.

Could you explain a little bit more about this? Or point me in a direction where I could find out more? Super curious. Thanks

A dark pool is just a private securities market. They don’t have to disclose much since the general public can’t participate but they can trade all sorts of exotic instruments without a lot of the “public focused” regulations.

what is an "exotic instrument"?
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