In order for a free market to operate, investors must be willing to participate in both sides of the transaction, which brings us to the topic of the stocks to short this week. If you’re feeling optimistic about the pessimistic trajectory of embattled enterprises, this list may be for you. Still, consider yourself warned. Since the post-pandemic new normal, few people in the retail investing game appreciate bearish traders. No matter how many times you attempt to convince skeptics that shorting makes the market more efficient by identifying lackluster enterprises, most don’t care. That’s one of the smaller risks associated with stocks to short.
Of course, the biggest concern is that little thing: unlimited liability. However, you should know about this before even thinking about stocks to short.
Finally, this list consists of companies with certain questionable attributes and lackluster (or even downright negative) support from covering analysts. To be sure, analysts’ opinions don’t represent the end-all, be-all. However, since analysts attempt to always be diplomatic, their pensiveness says a lot. Below are stocks to short this week (but only for the hardened risk-takers).
| AMRS | Amyris | $1.59 |
| ALLY | Ally Financial | $32.99 |
| TTOO | T2 Biosystems | $1.39 |
| BKH | Black Hills | $64.38 |
| SHAK | Shake Shack | $56.89 |
| NVTA | Invitae Corp. | $2.11 |
| WRLD | World Acceptance | $97.24 |
Amyris (AMRS)
A synthetic biotechnology and renewable chemical company, Amyris (NASDAQ:AMRS) serves specialty and performance chemicals, flavors and fragrances, cosmetics ingredients, pharmaceuticals, and nutraceuticals markets. Although seemingly scientifically relevant, AMRS struggled throughout 2022. In the trailing year, shares stumbled more than 62%, representing a staggering loss.
To be fair, short interest for AMRS is elevated at 19.75% of the float. Also, Amyris’ short interest ratio pings at 9.9 days to cover. Per Fintel’s proprietary Short Squeeze Score, AMRS printed 73.12 out of 100, with higher numbers indicating greater probabilities of a short squeeze materializing. Nevertheless, Amyris features poor financials. Notably, its balance sheet suggests a company that’s deeply distressed. Also, its profitability margins sit in negative territory.
Currently, Wall Street analysts peg AMRS as a moderate sell. Although it features a price target implying an upside potential of nearly 26%, this forecast doesn’t seem likely to pan out. Therefore, it’s one of the stocks to short for extreme risk-takers.
Ally Financial (ALLY)
An American bank holding company, Ally Financial (NYSE:ALLY) provides financial services including car finance, online banking via a direct bank, corporate lending, vehicle insurance, mortgage loans, and an electronic trading platform to trade financial assets. In most other circumstances, Ally would be incredibly relevant. However, under the present environment where consumer sentiment runs near historical lows, ALLY seems more of a liability.
Cynically bolstering the case for ALLY as one of the stocks to short this week is its short interest. At 6.38% of the float and a short interest ratio of 4.58 days to cover, these stats don’t come off as remarkable. Indeed, Fintel’s Short Squeeze Score for Ally pings at 58.92. You’re probably not going to get squeezed.
On the other hand, Ally’s fiscal picture isn’t necessarily the weakest in town. So far, it features strong revenue growth and average net profitability. However, its balance sheet could use some work. Notably, Wall Street analysts peg ALLY as a consensus hold. With a price forecast implying only 2.6% upside potential, Ally isn’t exciting for the bulls, which might make it exciting as one of the stocks to short.
T2 Biosystems (TTOO)
A biotechnology firm, T2 Biosystems (NASDAQ:TTOO) specializes in addressing sepsis. Per its website, T2’s platform is the first and only US Food and Drug Administration-cleared diagnostic test to provide species identification of sepsis-causing bacterial and fungal pathogens directly from a whole blood sample and independent of positive blood culture.
Though profoundly relevant from a scientific perspective, the problem is that TTOO stinks as an investment. I’m not saying that as a pejorative. It’s just the harsh reality associated with a stock that hemorrhaged nearly 93% of its equity value. Just from that alone, TTOO could be one of the stocks to short this week. Also, the financials are ugly. Operationally, both the company’s long-term revenue growth rate and net margin sit below parity. Gurufocus.com warns that TTOO may be a value trap. And T2’s Altman Z-Score of 19.98 below breakeven indicates a deeply distressed enterprise.
Admittedly, T2 carries a consensus hold rating and a price target implying over 6% upside potential. However, with a short interest of only 7.09%, speculators aren’t interested in TTOO. Thus, it might be one of the stocks to short.
Black Hills (BKH)
Quite possibly the riskiest idea here among stocks to short this week, I’ll let you decide if Black Hills (NYSE:BKH) is worth pursuing. A diversified energy firm, Black Hills represents an electric and gas utility. It covers South Dakota, Montana, Wyoming, Colorado, Arkansas, Kansas, Nebraska, and Iowa. Unlike other utilities, though, BKH underperformed in 2022. During the trailing year, shares fell nearly 4%. Since the January opener, the stock plunged 9%.
Still, what worries me about targeting utilities as stocks to short centers on their underlying relevance. Essentially, utility firms symbolize natural monopolies. That said, those who decide to go bearish on BKH will likely find modest opposition from the bulls. Per Fintel, Black Hills’ Short Squeeze Score of 56.48 rates only a bit above average.
On the financials, Black Hills doesn’t scream as particularly vulnerable. However, Gurufocus.com identifies two red flags. First, the company keeps issuing new debt. Second, its Altman Z-Score of 0.94 reflects a distressed enterprise. On Wall Street, analysts peg BKH as a consensus moderate sell. In addition, their average price target is $64.50, implying growth of only 0.55%.
Shake Shack (SHAK)
A fast-casual restaurant chain, Shake Shack (NYSE:SHAK) started out as a hot dog cart inside Madison Square Park in 2001. From there, its popularity grew, becoming the popular brand it is today. Nevertheless, if broader economic conditions continue to turn negative on the consumer – such as mass layoffs – SHAK would become suspect. Indeed, it could rank among the stocks to short. Fundamentally, a company like Shake Shack risks vulnerability to the trade-down effect. Basically, consumers may drop down to one of Shake’s cheaper-offering rivals.
Financially, SHAK doesn’t rate it as a particularly terrible investment. However, it’s very much overvalued at this juncture. For instance, the market prices SHAK at 2.51 times sales. In contrast, the sector median sits at 1.05 times. Also, SHAK trades at 32 times the operating cash flow. This stat ranks worse than nearly 88% of the competition. Turning to Wall Street, analysts peg SHAK as a consensus hold. However, their average price target sits at $53.43. This implies a downside risk of nearly 4%, possibly making it one of the stocks to short.
Invitae (NVTA)
A biotech firm, Invitae (NYSE:NVTA) specializes in genetic testing. As the company’s website explains, genetic testing can help guide some of the most important health decisions. While intriguing, the optimistic angle of this discussion stops here. As an investment, NVTA presently rates as putrid. During the trailing year, NVTA lost nearly 81% of its equity value.
Interestingly, NVTA popped up 13% since the January opener. Cynically, this burst of positivity might only be a dead-cat bounce. Possibly, then, those who consider NVTA as one of the stocks to short this week may earn some quick profits. Also, Invitae’s Short Squeeze Score is only 64.69 out of 100, which isn’t that high.
Financially, the narrative for Invitae continues its ugly streak. For starters, the biotech suffers from a distressed profile with an Altman Z-Score of 7.69 below breakeven. As well, both the company’s long-term revenue trend and its net margin ping as negative – never a great sign. To add insult to injury, NVTA trades at 3.2 times its book value. In contrast, the sector median sits at 2.32 times. Lastly, Wall Street analysts peg NVTA as a consensus moderate sell. In addition, their average price target sits at $2, implying nearly 4% downside risk.
World Acceptance (WRLD)
Based in South Carolina, World Acceptance (NASDAQ:WRLD) represents a financial services firm. Specifically, the company specializes in personal installment loans. Per the company’s website, these loans help manage life’s unexpected expenses. While it’s an interesting concept, here’s the problem: WRLD stinks. In the trailing year, shares plunged nearly 55%.
But it’s more than just technical rumblings, which can ebb and flow unpredictably. Rather, with the Federal Reserve hiking benchmark interest rates, people have fewer incentives to borrow money. Indeed, borrowing money is the last thing you’d want to do at a time like this. So, WRLD’s 45% jump higher so far this year could be a dead-cat bounce. If so, it would potentially qualify as one of the stocks to short.
As with some of the other names above, World Acceptance doesn’t suffer from truly abhorrent financials. However, its balance sheet could use some shoring up of weak points. Also, WRLD objectively rates as overvalued. Currently, the market price of WRLD is at a trailing multiple of 44.81. This metric ranks worse than nearly 84% of industry players. Turning to Wall Street, analysts peg WRLD as a consensus moderate sell. Further, their average price target sits at $32, implying a downside risk of 66%.
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.