Short Squeeze Specialists: 3 Stocks With the Expertise to Defy Bearish Expectations

Stocks to buy

For those seeking blistering returns in a relatively short amount of time, short-squeeze stocks may be the go-to place. Here, contrarians leverage the power of psychology to the extreme, leading to possibly intense fervor.

To recap, a short position starts when a speculator borrows shares of the targeted enterprise from a broker. From there, the trader dumps the securities in the hopes of picking them up later at a discount. The aim is to return the borrowed shares back to the broker and pocket the difference as profit.

However, because the borrowing action represents a contract, if the price of the targeted security rises, the speculator may be forced to pocket losses. And if the bearish trader doesn’t get out quickly enough, these losses can quickly accelerate. And that could lead to a margin call, among other things.

For the bears, getting caught out can be a terrible situation. On the flipside, it can be incredibly for the bulls. Below are short-squeeze stocks to consider.

Biomea Fusion (BMEA)

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A clinical-stage biopharmaceutical firm, Biomea Fusion (NASDAQ:BMEA) focuses on the discovery and development of covalent small molecule drugs. These therapeutic solutions are aimed to help patients with genetically defined cancers and metabolic diseases. Per its public profile, Biomea’s main product candidate is BMF-219, an inhibitor which addresses certain tumors and type 2 diabetes.

Financially, prospective investors must focus entirely (for now) on the narrative). Experts don’t anticipate revenue generation in fiscal 2024. In fiscal 2025, sales could hit $2.5 million, with a high-side target of $15 million. That’s not exactly a whole lot, not when you consider the trailing 12 month (TTM) net loss of $127.27 million.

That said, analysts rate shares a consensus strong buy with a $47.29 average price target. That implies just under 300% upside potential. Further, the high-side target shoots up to a whopping $90 per share.

Here’s where it gets very interesting. According to Fintel, BMEA features a short interest of 67.49% of the float. Moreover, the short interest ratio clocks in at 26.63 days to cover. All it takes is one match to light the fuse. This is one of the short-squeeze stocks for contrarian speculators to consider.

Bowlero (BOWL)

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Headquartered in Mechanicsville, Virginia, Bowlero (NYSE:BOWL) falls under the consumer discretionary space, specifically the leisure subcategory. Per its corporate profile, Bowlero operates bowling entertainment centers under the brand names AMF and Bowlmore Lanes, in addition to its namesake label. Further, the company provides hosting services, along with overseeing professional bowling tournaments.

Fundamentally, what makes BOWL stock so enticing as a contrarian play is the underlying consumer economy. Right now, circumstances are challenging, with inflation and high borrowing costs crimping demand. However, it’s not that people aren’t spending. Rather, they’re being selective. In this case, bowling is an activity that can’t be readily duplicated at home. Thus, Bowlero may have an advantage.

During the TTM period, the company posted net income of $99.83 million or 57 cents per share. Revenue reached $1.11 billion, currently growing at a year-over-year rate of 7%. For fiscal 2024, analysts see sales rising to $1.14 billion, up 8% from the prior year.

Enticingly, BOWL represents one of the heavily shorted securities, with a short interest of 62.33% of its float. Also, the underlying ratio stands at 23.82 days to cover. With stats like that, BOWL makes a strong case for short-squeeze stocks to consider.

SunPower (SPWR)

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Based in Richmond, California, SunPower (NASDAQ:SPWR) falls under – as you might expect – the solar technology ecosystem. According to its corporate profile, SunPower offers solar, battery storage and home energy solutions primarily in the U.S. and Canada. Some of its solutions include Equinox and SunVault, which are systems designed for modular deployment in residential applications.

To be fair, SPWR has not attracted positive attention among Wall Street experts. That’s hardly surprising given that in the trailing one-year period, SPWR stock gave up nearly 71% of market value. Further, the overall assessment of SPWR sits at moderate sell. If the red ink wasn’t enough to scare you, these experts have pegged a $3.07 consensus price target. That implies about 6% downside risk, even after falling 33.4% year-to-date.

Unfortunately, the double whammy of inflation and high borrowing costs imposed significant hardships on solar firms, especially those focused on residential services. Still, when looking at the trailing month, SPWR gained almost 38%.

Drilling into the details, SPWR represents the most shorted security right now at 87.78% of the float, per Fintel. Also, the short interest ratio lands at 8.88 days to cover. If you want to speculate, this could be one of the top short-squeeze stocks to consider.

On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare. Tweet him at @EnomotoMedia.

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