The short-squeeze

In a market so broken as this one, where no fundamental or technical analysis works, and where logic and rational thought have been flipped upside down (Thank you Fed), the best strategy is to merely go long on the most shorted stocks and wait for the epic short squeeze that is bound to happen.

GameStop (GME) was one of those shares whose short-interest was the main catalyst to push the company’s price into the stratosphere. The stock price increased by 6 times reaching $380 by end of day yesterday. However, to those who have missed this epic rise, there are still plenty of stocks who exhibit the same ratios as GME.

If you’d look at the most shorted small cap companies in the Russell 3000 - specifically those with a short interest at 50% or more of float, you’d come up with the following table.

To quote Zerohedge “For those who wish to gamble their next stimmy check and frontrun the next reddit-raid, the best move would be to buy equal amounts of the 10 companies (ex GME) and just wait for the short squeeze panic to unroll. Yes, there is a risk that the entire stimmy will be lost, but that would require logic and fundamentals to matter again... and we just don't see that happening any time soon.”

Well as it happens that three days later, this basket has more than tripled in value. So to all those who used this strategy, congratulations.

Of course, since then this trade has blown up, and in addition to just the most shorted stocks listed above, we now know that at least one more hedge fund - Maplelane Capital - in addition to Melvin Capital (which blew up and only a bailout from Citadel and Point72 prevented a disaster), has been dragged into the fray, after Zerohedge published its publicly disclosed puts last night, which has given retail traders an even broader universe of companies to squeeze.

Other Stocks To Short-Squeeze?

As mentioned, this brought an interesting point when choosing and looking up the most shorted names. How would the list change? So in order to extend the possible list of short squeezes, I’ve used Bloomberg and run a screening of the most shorted companies (without a market cap limit, like in the previous table). The results were interesting.

Some of the names repeated themselves such as - GME, BBY, ANC, FIZZ, DDS, GOGO, SRG - however, some even smaller companies that weren’t noticed before, such as Saddle Ranch Media - whose stock costs one-hundredth of a nickel (probably for good reasons) and which “is a diversified media and entertainment company operating three divisions: Saddle Ranch Digital, Saddle Ranch Film, and Saddle Ranch TV.”

Another company is KYN Capital Group (KYNC) - a "capital-finance leasing company" and both of which are pink sheet, microcap companies - the first has a market cap of just $9MM and, according to Bloomberg, a short-to-float ratio of 129%, or just below that of Gamespot, while KYNC is a $15MM microcap, which according to Bloomberg has an even more ridiculous 399% short-to-float ratio.

Which begs the question: as the dash for (shorted) trash continues, and with r/wallstreetbets ravaging the usual "most shorted" suspects within the small cap Russell 3000 universe, is it about to move to the micro-cap pink sheets, where liquidity is even more non-existent and one squeeze raid can send a stock orders of magnitude higher than ever GME, and make anyone an overnight millionaire?