A good read... go nakd! The Next GME: A Conclusive, Systematic Analysis To Determine Today’s SINGLE BEST Short Squeeze Opportunity
A bit of background first to afford some credibility to what I go on to explain: I haven’t been a Redditer for long. I majored in mathematics (think the likes of stochastic calculus and the Brownian motion), have been working in ‘high finance’ for all of my professional career, and have been trading the markets for over six years. I only joined Reddit a couple of days back to better understand what drove the GME story after being late to that rally, and with the sole purpose of finding out if there is still an opportunity for me (and the thousands of others out there who missed out on the GME glory run) that can be turn into cash in the bank.
After understanding the mechanics of what drove GME, armed with the hitherto-unprecedented knowledge that a retail investor base can in fact bring hedge funds down to their knees in the very specific context of a short squeeze trade under the right circumstances, I decided to start from scratch and scour the US market for the best short squeeze opportunity out there NOW (01 Feb 21) without any bias towards any particular stock as I held nothing at this point and was on an unadulterated quest for the true best short squeeze trade - it could be GME, it could be AMC, or it could be something unheard of
Using data from short side analytics subscription services, I started off by compiling a list of the top 50 names in the entire US market with the largest short interest. All the information I used is publicly available and I am not breaching any obligation or regulation if I present the data in a summarised format as I have below. To keep it this way, I will refrain from sharing longer spreadsheets of raw data or revealing the specifics around the specific data sources used. Rest assured, the data hasn’t been tampered with to serve an ulterior motive as
* I have none
* I’m pretty sure that’d amount to market manipulation which is a criminal and possibly jail-able offence
Some important points to note here:
1. Collecting and processing short-side statistics is not a hard science. Commonly used metrics like SI, DTC, utilisation, fees etc can vary depending on the sources of the underlying data. It would be worth noting that primarily, there are two types of short-side data viz. exchange-driven data which is based on the number of shorts traded in the market and lender-driven data which is based around quantifiable characteristics about the securities that are borrowed to facilitate said short. Since naked shorting is banned, the two are theoretically equivalent but in practice some differences are seen. This is also the reason that short-side data, which is critical to identifying short squeezing opportunities, is almost never real-time and the most reliable data, from my experience, has at least a one day lag.
2. Other things being equal, it is easier for a retail investor base to squeeze a short on a company with a smaller market cap than one with a larger market cap for the very simple reason that the former calls for a smaller investment outlay than the latter
3. The metrics:
1. Short float: This is the total number of a company’s shares that are traded short, commonly estimated by the number of shares being lent out
2. Short interest (SI): This is the short float as a percentage of a company’s free float and is one of the most important indicators of how heavily a company is shorted. The higher the SI, the more heavily the company is shorted
3. Utilisation: The only difference between SI and util is that the denominator of the latter is the number of lendable shares which in practice can be different (less than) the free float of a company
4. Days to cover (DTC): This is the company’s short float as a proportion of its recent volume, usually trailing 30 days ADTV (Average Daily Trading Volume). Other things being equal, the higher the DTC, the more difficult it would be for a short seller to cover their short without raising the price significantly (which in turn makes a short cover more painful i.e. expensive for the shorting party) - this is also coincidentally an explanation of what a short squeeze is for those who care
5. Borrow fee: Fees paid to borrow a security. The higher the fee, the more in-demand is a security’s borrow for directional (shorting) or arbitrage trading purposes
I built a squeeze metric which summarises much of the aforementioned data into one number which I then normalised into Z-scores making up my Squeeze scale. The higher a name ranks on this list, the more practical and compelling of a short squeezing opportunity it presents. Below (or attached titled, “Start of 2021”) are the top 10 names from the list as of the **start of 2021.**
[Short squeeze scale at the start of 2021 \(higher the 'better'\)](https://preview.redd.it/f1r02atb7ze61.png?width=1694&format=png&auto=webp&s=0c8d95171d8bbe52a0eb14c52f6279e31e50a8ab)
Many familiar names feature here, including our hero, GME. Also notice NAKD being in pole position although the short interest at this stage is not high enough to classify it as an easy-win that GME appears to be with its 90% + SI at this stage. Remember that I mentioned that processing short-side statistics is not a hard science and subject to multiple interpretations? Knowing this, I ran multiple iterations of the squeeze multiplier calculation after making a host of justifiable adjustments but to my surprise, it came up as THE best short squeezing opportunity at the start of the year despite its lower SI compared to its competition on the list - Why? Because of that tiny market cap. This again is quantifiable evidence especially for retail investor bases that the market cap of a stock makes a world of difference in terms of its allure as a short-squeeze trade.
Now that we have some hindsight perspective, I ran the exact same model to answer our golden question: **What is the CURRENT best short squeezing opportunity?** The analysis is as of this weekend so some of the numbers below are as of 29 Jan 2021. However, this was refreshed thereafter and the results are unchanged (below/attached titled, “Current”):
[Current Short Squeeze Scale \(Higher the 'better'\)](https://preview.redd.it/hwue5kj67ze61.png?width=1522&format=png&auto=webp&s=630e26643eca7604ebeb2ae9ef41192836a896f4)
Now, **NAKD US** has my full attention as should be the case for all of you by this point. You’ll also notice that GME has dropped off the top 10 list now (it is still in the top 25) because its market cap has burgeoned and short interest has tapered off palpably (on the back of Melvin and others covering their shorts in part at least), making better candidate-companies for short squeezing trades for those who don’t already have a position in GME or have taken profits (or losses) from GME.
This already made a compelling case for NAKD but I wanted to be 100% certain that this is the BEST short-squeeze opportunity out there on the back of my analysis so did some additional work to come up with this (below/attached, titled “Charts”):
[Charts](https://preview.redd.it/xdwve2m77ze61.png?width=1562&format=png&auto=webp&s=24d1583cbf28565f051e80803e5cfe4b05d3f9a9)
For this, I decided to compare the winner of our test, NAKD, a name that we recognise a symbol for what is probably the history’s first retail short squeeze success, i.e. GME, and the runner up of the above test, ATOS, for good measure. What GME had going for it was a lethal combination of high DTC and high SI, both of which have now tapered off - not to make it a bad trade but less alluring to alternatives now, chiefly NAKD, especially given GME’s high price. Sure, it could rise to $1,000 but would you rather make a 3X on GME now or a much easier to attain 9X on NAKD with it going to a paltry mid teen number? It was at this point that i jumped on Reddit to check if there was a following for this stock and sure enough there was a small but budding one (do join the sub-Reddit [https://www.reddit.com/r/nakd/](https://www.reddit.com/r/nakd/) \- I will try posting this on multiple sub-Reddits to the extent that my karma allows me to).
If I were fortunate enough to have made money on **GME**, I would use my profits from GME on the new GME that is NAKD now rather than try squeeze more out of GME. I must stress that this is not to undermine the efforts of our brothers on the GME frontline for whom i have great respect but is merely a rationalisation of what makes a fine short squeeze opportunity right now independent of other positions and also relative to its peers.
My **DTC** data for NAKD is incorrect in the above chart so I added more accurate estimates from reverse calculations from the SI for the last three days. In terms of SI and price action, NAKD is now where GME was from early December 2020 up to around 20 Jan 2021. I would estimate that it could take anywhere between 1-3 weeks of continued, dedicated, diamond-hand buying and holding (the more done early on, the shorter that wait time will be) before this ripens into GME-like results.
With regards to the c. **30M shares new offering** in this name and concerns around how much this can dilute the price and SI: Normally, I would worry about the dilutive effects here but in this case, this is a direct offering so no new shares are created and in any case, it is too small to make a meaningful impact on the short float (even if there were new shares coming to the market, the estimated SI drop would be under 6%). It does mean that up to 30M additional shares can enter the lending pool allowing hedge funds to borrow up to another 30M shares that we might need to hold up against so may see a few more flat to down days like we did today but again, this is just 6% of SI and does not have any material impact on the short squeeze thesis here, in my opinion.
If we continue to pile on the buying pressure (especially if liquidity remains low like it was today), **NAKD will be a sure shot repeat of GME with no escape for the hedge funds shorting this name**. All that is needed now is for more people to realise this to give it the momentum it needs to take it from being merely this ‘sure-shot’ as long as the aforementioned conditions hold to a position where we basically decide the price at which the hedge funds buy this back - then you’re talking your $15 or $50 or $100 or higher. KNOWLEDGE IS POWER - **if this makes sense to you, please help me spread the word!**
This is an analysis purely from a short-squeeze angle but i know there is some fundamental analysis as well out there from some trustworthy sources to warrant an encouraging valuation if the above is not compelling enough.
Now for the **disclaimers**: I am not a financial adviser and this is not financial advice. All of this is my personal opinion and encourage you to conduct your run your own due diligence before making any investment decision. Your capital is at risk but in my opinion, so is the risk of losing a **once in a lifetime opportunity that buying NAKD presents now to realise the financial freedom that for me anyway would take years if not decades to achieve through conventional means**. I wouldn’t have put my hard-earned money from over the years into this without doing all of the above as rigorously as I did and if i didn’t believe in the unbiased results that were found. I am doing this so that I can provide for my sibling who works an intolerably strenuous job involving a 5 hour commute every day and so that i can buy my parents a house worthy of being called their residence and I am sure you have similar aspirations as well. This is the stock market in which there is no such thing as a guarantee but this is quite possibly the closest thing we, as retail investors, can get to a guarantee if we unite and work towards a shared objective. he numbers speak for themselves so hey get out there and do what you have to do - feel free to share and re-post any of the above with whoever and wherever you please. I am not asking for any upvotes - all I want is for this to work for us all.
\#YOLO #NAKD #DD
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