| 
As we keep on racing toward the new year, most investors are busy looking for the best stocks to buy for 2025. There has been a lot of talk about AI stocks continuing to lead this market rally higher. Energy stocks seem to be a popular choice with the incoming administration. A lot of investors also think we could see a big rebound in consumer discretionary stocks next year. Not to mention, cryptos have been hot as well – and some analysts think that can continue. But when it comes to potentially the best stocks to buy for 2025, here’s another idea: short squeeze stocks. These trades are heavily shorted stocks that experience sharp, rapid increases in price. When short sellers are forced to close their positions and “buy back” their shorts, it creates huge buying pressure in these stocks, catapulting them higher… In some cases, way higher. GameStop: A Short Squeeze Case in Point For example, back in 2021, GameStop (GME) was a highly profitable short squeeze play. Throughout 2019 and 2020, investors bet heavily against GME stock. The idea was that video game sales were migrating online, which implied that GameStop would go the way of Blockbuster. That led short interest in GME to climb to over 100% of its float, meaning that more shares were sold short than were available for public trading. And for a few years, those short sellers made out like bandits. GME stock crashed from $10 in 2015 to less than $1 by early 2020. But for a variety of reasons, GME started to climb in late 2020, rising from $1 in August to $5 by December. A lot of short sellers decided to cover, which pushed the stock even higher, up to $10 by mid-January. That pressure continued, leading GME to spike to $20 by late January. Then, suddenly, all the short sellers began covering in droves. And within days, GME stock was trading above $100. 
That’s a successful short squeeze. And we think quite a few could happen in 2025. Why We See Short Squeezes on the Way Our reasoning here is simple: Short squeezes tend to happen more often during periods of mania on Wall Street. Just look back to the GameStop saga of late 2020 and early 2021. During that time, stocks were charging higher. And animal spirits were running rampant as Americans were taking their stimulus checks and dumping them into stocks. There was mania on Wall Street. And that gave birth to several money-making short squeezes like with GME. We could be in for a similar setup in 2025. That is, thanks to AI-driven euphoria, stocks are charging higher right now. They rallied more than 20% in 2023 and are on track to rally 20%-plus again this year. In fact, that will mark the first time the stock market has rallied 20%-plus in consecutive years since the 1990s’ Dot Com Boom. As if that weren’t enough bullish fodder, the Republican Party’s recent governmental sweep has seemingly unleashed businesses’ animal spirits too. With Republicans now essentially in control of the White House, House and Senate, we’ll likely see a wave of pro-growth, deregulatory policies over the next few years. And in anticipation of such pro-business policies, consumer and business sentiment has been surging lately. According to the University of Michigan, U.S. consumers' assessment of current economic conditions jumped this month by the most it has since 1992. Meanwhile, the NFIB Small Business Optimism Index just spiked to its highest level in over three years. 
This is certainly starting to look and feel like a mania on Wall Street. Wall Street Mania Could Last a While A lot of stocks and exchange-traded funds (ETFs) have soared over the past few months. But some of the biggest winners have been short squeeze plays. Indeed, over the last three months, the UBS High Short Interest Index – which tracks the 100 stocks with the highest short utilization rate with market caps over $1 billion – has risen about 50%. The last time this index soared like this? Yep, you guessed it – 2020/21, amidst GameStop’s short squeeze saga, when this whole index soared almost 350% from trough to peak. 
In other words, many signs indicate that we’re in the middle of a Wall Street mania right now. And such manias tend to last. For example, the post-COVID market mania lasted for two whole years. The 1990’s Dot Com Boom mania endured for about five years. The Reaganomics-inspired mania went on for eight years, and the post-WW2 mania persisted for nearly a decade. Clearly, these manic eras tend to have longevity. And we’re just now entering this one, meaning it will probably last into and throughout 2025. That, in turn, means short squeeze stocks could soar next year. The Final Word But perhaps the best part about this golden short-squeeze opportunity may be the result of fortuitous timing. Over the past few months, my team and I have been working to create what we hope will be the ultimate stock-picking tool – one that can help us spot the best stocks to buy at the most opportune time. I’m talking stocks with strong fundamental, technical, and sentimental support; nearly airtight trades that are strong in every way. And we just used that screener to uncover some trades that could benefit from a huge short squeeze in 2025. We narrowed our search criteria to focus on the stocks worth more than $1 billion and which have more than 20% of their float sold short. For example, Mobileye (MBLY) – a sensor- and equipment-maker for autonomous vehicles (AVs) – looks like a good pick here. Investors have been betting against the stock because the auto market has been hammered by high financing rates. But rates should fall in 2025, which would lead the auto market to rebound strongly. If that happens, MBLY stock could have a big short squeeze. Symbotic (SYM) also looks interesting here. The firm makes robots to automate warehouses. And if the incoming administration pushes for the reshoring of manufacturing operations, that industry could be red-hot throughout 2025. Right now, over 30% of SYM’s float is sold short. So, if Symbotic does benefit from accelerated growth next year, SYM could enjoy a big short squeeze as well. Then there’s MarathonHoldings (MARA), a major crypto stock with a big short interest. About 20% of its float is sold short. C3.ai (AI) is a promising AI software business that has about 22% of its float sold short. And it’s a similar story for trending retailer Revolve (RVLV). To us, those all look to be good prospects for a short squeeze rally in 2025. And each was flagged by our latest stock picking tool. If you’re an investor looking for security and stability in an uncertain environment, Auspex may just be the solution. Learn more about how this tool can help you find the most promising stocks in the market. Sincerely, | 
No comments:
Post a Comment