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3 short squeeze candidates in the consumer discretionary sector: April 28, 2021 05:47 PM ET (BZ Newswire) -- Long Ideas
Low float stocks can be some of the most volatile stocks in the market. If you mix in a short squeeze, the potential short-term gains in a low float stock can be extreme.
A stock's float is the number of shares that trade freely on the public market. Because insiders and institutional investors don’t typically trade their shares on a daily basis, those shares don’t typically contribute to a stock's near-term liquidity.
Float is the number of shares that remain after accounting for insider and institutional ownership.
Why Is It Important? When a stock gains positive momentum in the market, momentum buyers can rush in all at once. If a stock has a high short interest, short covering can quickly ramp up demand for shares, triggering a short squeeze. Since low float stocks have relatively few shares trading freely, a major imbalance in supply and demand can serve as rocket fuel for the share price.
Buying a low float stock with high short interest isn’t a guarantee of a short squeeze. There still typically needs to be some form of catalyst to get the stock moving in the first place. However, traders can keep an eye on these stocks for any signs of life to try to catch most of a potential big move.
Related Link: 3 Short Squeeze Candidates In The Media Sector
Short Squeeze Candidates: Here are three consumer discretionary sector stocks that have all the ingredients for a short squeeze.
Vinco Ventures Inc (NASDAQ:BBIG) Vinco Ventures is a consumer products and digital marketing company that owns brands such as The 911 Help Now, Global Clean Solutions and HMNRTH. The stock is also the perfect short squeeze candidate within the consumer discretionary sector.
Vinco’s 6.4 million-share float is the lowest among any consumer discretionary stock with at least 20% of its float held short. However, Vinco has more than 31% of its float held short, more than either of the other two stocks mentioned. In addition, short squeeze traders have frequently targeted stocks trading under $5 per share this year, and Vinco shares currently trade at just $2.53.
Vinco demonstrated its potential for volatility when it skyrocketed more than 300% in a single day back in January after the company announced a merger deal with ZASH Global Media And Entertainment.
Innoviz Technologies (NASDAQ:INVZ) Innoviz is a solid-state LiDAR sensors and perception software company that has exposure to the popular next-generation automotive technology trend. The company went public earlier this month via a SPAC merger.
Innoviz reported just $5 million in 2020 revenue, but as many meme stock traders have realized in 2021, short squeezes are technical market phenomena and don’t necessarily have anything to do with the company’s underlying business fundamentals or the stock’s long-term outlook.
Innoviz has a one-two punch of a small float of 8.6 million shares and a high short percent of float of 24%. The stock also trades at just $11 per share.
Poshmark Inc (NASDAQ:POSH) Poshmark is a consumer-to-consumer social commerce marketplace that went public back in January.
Poshmark’s 29.4% short percent of float and its 9.89 million-share float provides plenty of opportunity for a potential squeeze. The stock also has a history of extreme volatility in its short time on the market. Poshmark priced its IPO at $42, but its stock jumped as high as $104.98 in early trading before falling back down to $43.80 in only about three months.
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