7 short squeeze stocks that could take off in October

Highlights

• A short squeeze is a rare market condition in which, instead of price correction, the share price rise unexpectedly.
• Due to the sudden rise in stock price, many traders panic and rush to cover their position to minimise losses, which leads to a further surge in the stock price.

In the stock market, one strategy used widely for market speculation is short sell. In the short sell, traders anticipate that the share price of a company will decline and take a sell position in the stock. However, if the share price doesn’t decline and starts to rise unexpectedly against the market sentiments, it leads to a short squeeze condition in that stock.

A short squeeze is a rare market condition in which, instead of price correction, the share price shoots up due to some positive trigger like higher earnings or any positive economic development. Due to the sudden rise in stock price, many traders panic and rush to cover their position to minimise losses, which leads to a further surge in the stock price.

Let us look at FTSE listed stocks that traders are heavily shorted and with the improving economic condition can give a surprise:

Cineworld Group Plc (LON: CINE)

The company operates a chain of cinema halls through various brands across ten countries, including the United States and the United Kingdom. The company’s stock has been on short sellers’ radar for over a year now as its operations were heavily impacted due to the Covid-19 pandemic.

However, successful vaccination across the globe and ease in restriction might open more cinema halls and theatres, which are going to benefit the company’s revenue and profitability. At present, around 8.28% of shares are in a short-sell position.

Carillion Plc (LON:CLLN)

The company provides support services to other businesses. It provides facilities management, energy services, and other services in the UK and Middle East countries.

The company’s stock has been declining after the regulatory investigation found out that it has misleading information in its financial statements, which has impacted its stock price.

The company’s around 7.16% shares are in a short-sell position at present. 

Petropavlovsk Plc (LON: POG)

The company is engaged in the exploration and production of gold through its mining operation in Russia. Petropavlovsk is one of the major Russian gold mining companies in terms of gold reserve and production. The company’s total gold production decreased by 39% during the first half of 2021 at 195.0 koz. All its three-mining sites reported lower production compared to the same period last year, which resulted in lower output. The company’s share has seen short interest build-up as the international gold price has been stable recently. Secondly, the company has not diversified its mining operation and only depended on gold for its revenue.

Short sellers have shorted 6.9% of the company shares at present.

Hammerson Plc (LON: HMSO)

The company manages the portfolio of retail spaces rented to brands, and it earns its revenue through rental income. Due to repeated lockdown in the UK, most of the physical stores were forced to close down, which impacted the rent collection of the company but ease in restriction after July 2021 has increased footfall in physical stores, which has improved the rental income. However, the company is still facing other issues like high net debt, which stands at £1.9 billion. It plans to reduce its net debt through the disposals of some retail properties, which might impact its future revenue.

At present, market participants have taken a short position in close to 6.3% of company-issued shares.

Wood Group (John) Plc (LON: WG.)

The company has operations in many countries, offering consulting and project management related services to its clients. The company’s revenue has declined by over 22% during the six months ended 30 June 2021 primarily due to the impact of the Covid-19 on the operations. Due to poor financial performance, the company stock has delivered negative returns to investors this year, resulting in the build-up of a short sell position.

Short sellers have shorted 4.64% of the company shares at present.

Network International Holdings Plc (LON: NETW)

The company operates in the digital payment segment with key operations in the Middle East and African countries. It has received regulatory clearance for its acquisition of DPO Group, which is expected to expand its payment services across 21 African markets and accelerate growth and revenue.

At present, market participants have taken a short position close to 4.47% of the company’s shares.

Tullow Oil Plc (UK) (LON: TLW)

The company operates in the exploration and production of oil and gas. It has a key operation in Africa and South American countries. The company turned profitable in the first half of 2021 by reporting an operating profit of USD 370 million on the total revenue of USD 727 million. Also, the company has brought down its net debt to USD 2,290 million from USD 3,019 million. However, the company’s stock has seen short selling mainly due to volatile crude oil prices in global markets.

At present, around 4.29% of shares are in a short-sell position.