At present, despite the ongoing bullish trend in the market, significant volatility persists. By 2024, short sellers have achieved record profits, even targeting major companies such as Nvidia (NASDAQ: NVDA) and Tesla (NASDAQ: TSLA), as evidenced by the unprecedented weekly profit reported in late April.
However, with stock market valuations soaring to historic highs (ATH) alongside substantial macroeconomic challenges, short sellers remain resolute in their strategies, undeterred by the bull market.
For those interested in capitalizing on bearish trends and potential market corrections, Finbold has compiled a list of the three most shorted stocks in the S&P 500.
Super Micro Computer (NASDAQ: SMCI)
Focusing on high-performance and efficient server manufacturing, Super Micro Computer (NASDAQ: SMCI) was, and possibly still is, well-positioned to benefit greatly from the rapid expansion of AI. However, on August 27, the activist short-selling organization Hindenburg Research released a report alleging the company had engaged in accounting irregularities and avoided sanctions.
At the time, SMCI shares were valued at $54.76, but by the end of the following trading day, this price had plummeted to $44.35, resulting in a decline of 19.01%. Although this response was not as severe as some of Hindenburg’s prior reports, as of the most recent update, SMCI stock has not managed to rebound, trading around $47.45.
In spite of this setback, year-to-date (YTD) returns have only slightly decreased to 66.21%, indicating that short sellers perceive an opportunity, as 20.15% of the stock’s float is currently shorted.
Nevertheless, analysts on Wall Street continue to hold a positive outlook. Following a 10-for-1 stock split, the average price target for SMCI shares is projected at $69.13, suggesting a potential upside of 45.9%.
MicroStrategy Inc (NASDAQ: MSTR)
As the largest corporate holder of Bitcoin (BTC), MicroStrategy has thus far outperformed the S&P 500. However, due to its strong linkage to the cryptocurrency, many investors have taken short positions, anticipating a potential decline in BTC.
Currently, 16.83% of MSTR’s float has been shorted. Despite founder and CEO Michael Saylor’s ambitious vision for MSTR to transform into the first Bitcoin bank, technical analysts have identified worrying bearish divergences that could signal a short-term correction.
As of now, MSTR shares are trading at $242.70, culminating in a total YTD return of 254.23%. While bullish sentiment remains strong, any significant correction might provide short sellers an opportunity for notable profits.
International Paper (NYSE: IP)
While short sellers frequently target technology and semiconductor firms for their considerable recent gains, any company showing signs of weakness becomes a prime target as well.
International Paper (NYSE: IP), the largest pulp and paper producer globally, has demonstrated unexpected strength in 2024. Currently, IP stock is priced at $48.76, reflecting a YTD increase of 33.44%, although it has been trading within a narrow range over the past month.
Amid challenges in sustaining profitability, the company has revealed plans to close four facilities, leading to over 650 job losses.
While analyst estimates foresee a slight revenue increase, they also predict a significant decline in earnings per share (EPS). Short sellers appear to be confident that IP shares will shed a considerable portion of their 2024 gains, with 12.52% of the stock’s float currently shorted.
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