Why These 4 Heavily Shorted Stocks Might Become the Next GameStop

The meme stock craze isn't over. Could one of these be Reddit's next target?
Anthony RussoJun 11,2021,15:49

The Reddit mob has gone after shortsellers of more than just GameStop (NYSE: GME) and AMC (NYSE: AMC) This week it was Blackberry (NYSE: BB) and Clover Health Investments (Nasdaq: CLOV), to name just a couple. For many participating in the short squeeze rally, the goal is to find the next AMC, and/or GameStop.

And there’s a few ways that can be done. You could take a look at “wallstreetbets,” the Reddit thread where the discussions of these so-called “meme stocks” happen. You’ll ideally want to view the thread daily before the markets open to see which stocks are under hot discussion and look to buy them ahead of a potential trading explosion.

Or you can take a look at the stocks with the highest short positions currently and buy them in hopes of them becoming the next big trend on Reddit.

Oh, and another thing: Push notifications on Elon Musk’s Twitter account; whenever he feels like it, he drives a stock higher.

These four stocks below have a chance to become the next GameStop and/or AMC.

1.GSX Techedu Inc. (NYSE: GOTU)

Percentage of Shares Short: 9.85%

Investors need to take a look at is China’s GSX, even though it has a number of headwinds surrounding it along with short interest.

In January, the tutoring platform was a meme stock that hit a high of $149.05. Since then, it has come crashing down and now trades at around $15 per share. And there’s a few reasons why the stock has tanked from those heights.

For one, several short-sellers reports have alleged the company of fraud. Two, there’s been several margin calls by Archegos Capital Management and big sell-offs.

Three, China has tightened the tutoring regulatory environment and recently fined GSX for misleading consumers with false advertising. And lastly, GSX was only of the first phase of the short squeeze rally in January and has failed to regain attraction from the Reddit gang.

Normally I would want nothing to with a company like GSX but it still has substantial ort interest. I would buy this stock and hold it for about a week or two. If the Reddit crowd drives up the price, then sell it when you’re satisfied with the return. If not then put a stop loss limit at or around $10 per share to limit the damage.

2. Tootsie Roll (NYSE: TR)

Percentage of Shares Short: 26.73%

Tootsie Roll, which has a massive amount of short interest, hit a high ofin January. $57.26 per share. But since then, the stock has mostly traded in the $30 to $35 price range. It did, however, hit a 12-week high of $35.34 per share on Wednesday—showing signs that the Reddit might flock heavily to this stock next.

In its latest quarter, Tootsie’s sales dipped 1% to $101.8 million, while earnings declined to 16 cents per share.

3. Carvana (NYSE: CVNA)

Percentage of Shares Short: 9.63%

If you’re more comfortable looking for shorted stocks that come with solid fundamentals then take a look Carvana.

For the first quarter, the online used car dealer posted revenue that doubled to $2.25 billion, beating the Zacks Consensus Estimate by 15%. It posted a loss of 46 per share in the quarter, better than the 70 cents loss that Zacks forecasted.

In August, I recommended buying Carvana ahead of President Joe Biden potentially cancelling $50,000 in student loan debt for each borrower. Such a move would give some people the financial flexibility to look at the auto market.

Along with a potential short squeeze, Carvana’s stock could pick up some momentum on some type of student loan debt cancelation.

4. fuboTV (NYSE: FUBO)

Percentage of Shares Short: 21.11%

fuboTV is another stock with high short interest that has solid fundamentals.

In late March, I recommended buying shares of fuboTV, as consumers continue to the cut the cord and turn to streaming services.

Since then, the company, which models itself as a “sports-focused” live TV streaming service, posted revenue for the March quarter that jumped 135% year-over-year to $119.7 million. As of March, fuboTV counted 590,430 subscribers, a 105% jump from last year.

Also, fuboTV announced earlier this week that its streaming service is available on LG Smart TVs in the U.S. The rapid growth the company has been experiencing along with some help from the Reddit crowd has nearly doubled the value of fuboTV’s stock since May 11.

Plus, the stock hit a high of $57.47 per share in January, so you have to wonder how much further it can go in the short-term. But investors should feel comfortable with a long-term buy here and hope that this stock becomes the sports version of Roku (Nasdaq: ROKU) someday.

For the the full, fuboTV sees its subscriber count growing to as much as 830,000.

Topics:meme stock