The 5 Most Shorted NYSE Stocks

Reviewed by Samantha SilbersteinReviewed by Samantha Silberstein

When initiating a short, sellers expect the stock price to head downward. Traders short sell by borrowing a stock that the seller doesn’t own. The seller must deliver the stock to its buyer at an agreed-upon price.

To make this happen, a broker lends a certain number of shares to a seller from that broker’s inventory. The shares are then sold to a buyer, and the proceeds are credited to the seller’s account. Eventually, the seller must close the short position by buying back the same number of shares and returning them to the original broker. If the price of the stock drops, the seller makes a profit by selling back the shares to the broker at a lower cost. If the stock price rises, the opposite happens, and the seller loses money.

1. Albemarle Corporation (ALB)

Founded in 1887, the Charlotte, North Carolina-based Albemarle engages in energy storage, consumer electronics, automotive, pharmaceuticals, and agriculture. The company is a player in the lithium industry, hoping to benefit from the ongoing transition to electric vehicles and clean energy technologies. The company develops, manufactures, and markets engineered specialty chemicals across three segments:

1. Energy storage: Produces lithium compounds for electric vehicle batteries and energy storage systems.
2. Specialties: Offers bromine-based chemicals, lithium specialties, and other high-end materials for various industries.
3. Ketjen: Provides catalysts and related technologies for petroleum refining and petrochemical production.

In its first quarter of 2024, Albemarle reported net sales of $1.36 billion, down 47% year-over-year. Net income for Albemarle was $2.4 million, compared with $1.24 billion a year earlier. The company cited lower lithium prices as the primary reason for the decline.

The company has said it’s been reducing costs to deal with its near-term cash flow issues.

2. Builders FirstSource Inc. (BLDR)

Builders FirstSource Inc. is an Irving, Texas-based supplier and manufacturer of building materials, manufactured components, and construction services for homebuilders, contractors, and consumers. BLDR has 570 locations across 43 states.

In the first quarter of 2024, Builders FirstSource reported net income of $258.8 million, down 22.5% from the previous year.

Despite higher interest rates impacting its bottom line via the housing market, BLDR is still expanding its market share through acquisitions—with several deals in the first half of 2024.

3. Dayforce Inc (DAY)

Dayforce, formerly Ceridian HCM Holding Inc. and based in Minneapolis, Minnesota, provides cloud-based platforms for payroll, workforce and talent management, and benefits.

In the first quarter of 2024, Dayforce reported revenue of $431.5 million, up 16.4% year-over-year. Its net income of $7.1 million was down from $9.9 million a year earlier.

Dayforce has been expanding its global footprint. For example, in February 2024, it acquired eloomi, an education platform, to strengthen its talent management offerings. The company said its drop in net income is due to macroeconomic conditions.

4. DaVita Inc. (DVA)

Founded in 1994 and headquartered in Denver, Colorado, DaVita manages a network of outpatient dialysis centers for patients suffering from chronic kidney failure. DaVita’s services include outpatient, hospital inpatient, home-based hemodialysis, and related laboratory testing.

In recent years, DaVita has expanded its offerings to include physician services and acute inpatient dialysis care. With more than 2,600 outpatient dialysis centers nationwide, DaVita is a dominant player in the U.S. dialysis market. In recent years, it’s seen substantial growth—both in revenue and debt. The company’s first quarter 2024 revenues were $3.07 billion, up 6.9% year-over-year, and net income was up 79% to $306 million.

DaVita has faced disruptions from a cybersecurity breach at its claims processing intermediary, Change Healthcare, and at the end of March 2024, it held $9.13 billion in debt.

5. Campbell Soup Company (CPB)

Campbell Soup Company, a stalwart New Jersey-based packaged food company in business since 1869, made news in 2024 with its $2.90 billion acquisition of Sovos Brands in March. This acquisition added popular and pricier brands like Rao’s, Michael Angelo’s, and Noosa to its line of household brands.

In its third quarter of fiscal 2024, Campbell reported mixed results. Net sales rose 6% year-over-year to $2.37 billion, primarily driven by the Sovos Brands acquisition. However, earnings per share dipped to $0.44 from $0.53 a year earlier.

The company’s two main segments diverged in performance: Its meals and beverages segment had a solid 15% increase in sales, primarily because of the Sovos Brands acquisition. By contrast, its snacks division declined 2% in sales. The company holds a debt load of $7.18 billion as of its fiscal third quarter of 2024.

What is Considered a Heavily Shorted Stock?

A company’s stock is considered heavily shorted when a high percentage of its stock is sold short. Short selling involves borrowing shares of a stock and selling them with the expectation that the stock price will decline, allowing the short seller to buy the shares back at a lower price, return them to the lender, and pocket the difference.

Several indicators that can help determine whether a stock is heavily shorted are the short interest ratio, short interest as a percentage of float, and increases in short interest. These are commonly found on finance and investing platforms.

What is a Short Squeeze?

A short squeeze occurs when a stock or other asset jumps sharply higher, forcing traders who had bet that its price would fall to buy it to forestall even greater losses. Their scramble to buy only adds to the upward pressure on the stock’s price.

How Can I Tell if a Stock is Being Shorted?

To determine if a stock is being shorted and to what extent, you can look at several key indicators. These include short interest, short interest ratio or days to cover, short percentage of float, changes in short interest, utilization rate, and the cost to borrow.

Heavily shorted stocks often have increased volatility, especially when there’s a short squeeze.

What Happens if I Short a Stock and it Goes to $0?

If you short a stock and its price goes to zero, that’s the ideal outcome, resulting in the maximum possible profit on the short sale.

The Bottom Line

The most heavily shorted stocks in the S&P 500 Index reflect investor sentiment about perceived risks and weaknesses in those companies. These stocks could serve as critical indicators for broader market trends, highlighting sectors or industries facing headwinds or skepticism from investors.

Understanding the reasons behind short positions can offer valuable insights for contrarian investors looking to capitalize on potential misprices in the market. Conventional investors can use the information to avoid potential pitfalls for a stock.

Read the original article on Investopedia.