Going contrarian at the right time can yield remarkably positive results, thus setting the stage for short-squeeze stocks to buy. To be sure, this practice imposes significant risks. However, if you just happen to get the trade right, you could laugh all the way to the bank.
Fundamentally, short-squeeze stocks center on the concept of sparking panic. In theory, no upper limit exists for securities: they can go as high as market demand dictates. However, that also means that if you take the opposite side wager, you could suffer unlimited liability. More than likely, you’ll get a margin call before you’re completely devastated but you get the idea.
Now, to mitigate a short transaction gone bad, a bearish trader may deploy countervailing actions. Mostly, this involves either buying the underlying security or acquiring call options. Either way, such moves represent upward pressure on the targeted stock, boding well for bullish contrarians. That’s why short-squeeze stocks can offer tremendous profits. But you must also prep for serious losses.
If you can handle the heat, below are wild wagers to consider.
Short-Squeeze Stocks: Safety Shot (SHOT)
An intriguing beverage manufacturer, Safety Shot (NASDAQ:SHOT) is the first patented beverage that helps people sober up faster by reducing blood alcohol content and boosting clarity. Fundamentally, the company offers tremendous relevance regarding road and personal safety. For the latter, people often make bad decisions or become victims of crime due to their inebriation. Thus, Safety Shot might offer critical relevance.
As for the former, the rate of drunk driving fatalities per 100,000 people has decreased by 36% nationally. Still, anti-drunk-driving advocates argue that more needs to be done. Specifically, 31% of all traffic fatalities involved drunk driving in 2021. While a sobriety drink might not be the complete panacea, it may be able to dent this terrible statistic.
Per Fintel, SHOT ranks number eight on its Short Squeeze Leaderboard with a short interest of 7.11% of its float. Its short-interest ratio is 3.39 days to cover. Although SHOT gained over 88% since the January opener, the bears are starting to place bets that it won’t go much higher.
Still, SHOT could surprise given the importance of the underlying product.
Imperial Petroleum (IMPP)
An international shipping transportation firm, Imperial Petroleum (NASDAQ:IMPP) focuses on transporting various petroleum and petrochemical products in liquefied form. Because of the unusual dynamics of the post-pandemic period – including an erosion of hydrocarbon demand – IMPP hasn’t exactly been a hot trade. Since the start of the year, shares slipped more than 40%.
Naturally, the bears see an opportunity. However, it’s also possible that IMPP could rank among the short-squeeze stocks to gamble on. Mostly, the fundamentals appear to support Imperial, with rising demand lending to a net bullish outlook for global tanker freight for the second half of this year. As confirmation, IMPP gained over 27% in the trailing one-month period.
Additionally, it’s worth mentioning that China’s demand for crude oil remains strong despite economic pressures there. Subsequently, big block trades targeting near-in-the-money (ITM) call options have materialized. With retail traders possibly representing the bulk of bearish sentiment, IMPP may be asking for a contrarian spike. Currently, IMPP ranks 147 out of 250 in Fintel’s Short Squeeze Leaderboard. Specifically, it prints a 13.27% short interest of its float.
Guardforce AI (GFAI)
Easily one of the riskiest ideas among short-squeeze stocks, Guardforce AI (NASDAQ:GFAI) shouldn’t be entered into lightly. Billed as an integrated security provider specializing in secured logistics, Guardforce AI brings intrigue thanks to cynical relevance. After all, certain nefarious activities appear to be on the rise. Therefore, Guardforce’s distinction solutions, such as robotics-based security, may represent a new way forward.
At the same time, GFAI has symbolized a risky venture since its public market debut. Against the January opener, shares lost 37% of equity value. In the past 365 days, they’re down almost 57%. Since its debut, we’re talking about a staggering loss of more than 97%. Nevertheless, GFAI also features a tendency to pop out of nowhere, thereby attracting market gamblers.
Financially, Guardforce lacks a sterling print. For instance, both its trailing-year operating and net margins sit deeply in negative territory. Its recent revenue trend appears to have flatlined as well. Still, over the past three years, the company’s book growth stood at nearly 60%.
Currently, GFAI ranks number 43 in Fintel’s short squeeze list with a short interest of 4.41% of its float.
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.