From GameStop to Blackberry, here's why the shorts are getting squeezed: Morning Brief
- GameStop Corp. (GME)
- JPMorgan Chase & Co. (JPM)
- Express, Inc. (EXPR)
- BlackBerry Limited (BB)
- The Macerich Company (MAC)
- National Beverage Corp. (FIZZ)
- NCR Corporation (NCR)
- Perma-Fix Environmental Services, Inc. (PESI)
- Macy's, Inc. (M)
- S&P 500 (^GSPC)
- Fidelity Global Concentrated Equity Class Series A (0P00012B2W.TO)
- Dow Jones Industrial Average (^DJI)
Tuesday, January 26, 2021
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A manic Monday to start the week.
Looking at the major averages on Monday, you might think it was a fairly placid trading session.
But underneath the surface, one of the wildest trading days we’ve seen in some time broke out.
In a story published Monday, Bloomberg’s Brandon Kochkodin chronicled the ongoing relationship between Reddit’s “wallstreetbets” (WSB) forum, and shares of the struggling video game retailer. In this story we find a fundamental case for buying the stock: A character from Michael Lewis’ famous book “The Big Short” (Dr. Michael Burry), an activist investor who also founded Chewy (CHWY), and along the way a redditor named “Senior_Hedgehog” plays a major role.
Truly a tale for the modern market.
But during the session, we also saw the breakout of a market-wide strategy to pile into names that investors are betting against en masse. According to data from FinViz, more than a dozen stocks with more than 30% of their outstanding shares sold short rallied more than 10% on Monday.
In other words, betting on companies that lots of investors are betting against was the biggest driver of single-stock moves to start the week.
Shares of La Croix-maker National Beverage Co. (FIZZ) rose more than 13% on Monday; more than 60% of the company’s stock is currently being sold short.
Some retail-related names were also caught up in this trade, as mall REIT Macerich (MAC) saw its shares rise more than 21% on Monday, while shares of Macy’s (M) were up 10%. More than 30% of both companies’ shares outstanding are currently sold short.
However, not all efforts to blow out the shorts succeeded on Monday.
Bed, Bath & Beyond (BBBY) — which has a short interest north of 60% — gained 1.5% on Monday, but not before some chicanery that saw shares rise as much as 50% in late-morning trade. Shares of BBBY, we should note, are up some 200% over the past six months.
And not every single-stock surge on Monday was tied to huge short interest. BlackBerry (BB), for instance, saw its stock spike by some 28% to start the week — causing the company to issue a statement explicitly stating that it had no news to report, and therefore no explanation for the rally. Just about 7% of BlackBerry’s outstanding shares are currently sold short.
Which brings us to beleaguered retailer Express (EXPR).
With a market cap under $100 million before Monday’s trade, this is a name that rarely gets much attention in the broader market. But a 131% rally to start the week changed that.
Before Monday’s open, Express shares were rocketing and the stock didn’t move all that much after the open. On Friday, the stock closed at $1.79 per share; on Monday, Express shares closed at $4.15.
Rarely does this kind of move come and go without explanation. But on Monday, the media and Wall Street analysts were left scratching their heads to explain this one-day double of a 1990s-era suburban mall staple.
“Express has been the subject of Reddit boards where users speculated [about] whether it could be the next GameStop, the video-game retailer that surged again today,” Bloomberg reported on Monday.
Leading everyone right back to where this day started: Reading Reddit and looking for the next big thing.
What to watch today
9:00 a.m. ET: FHFA House Price Index, month-over-month, November (0.8% expected, 1.5% in October)
9:00 a.m. ET: S&P CoreLogic Case-Shiller 20-City Composite Index, year-over-year, November (8.7% expected, 7.95% in October)
:00 a.m. ET: S&P CoreLogic Case-Shiller 20-City Composite Index, month-over-month, November (1.00% expected, 1.61% in October)
10:00 a.m. ET: Conference Board Consumer Confidence, January (89.0 expected, 88.6 in December)
10:00 a.m. ET: Richmond Fed Manufacturing Index, January (19 expected, 19 in December)
5:00 a.m. ET: Polaris (PII) is expected to report adjusted earnings of $2.89 per share on revenue of $2.1 billion
6:30 a.m. ET: General Electric (GE) is expected to report adjusted earnings of 10 cents per share on revenue of $21.83 billion
6:30 a.m. ET: DR Horton (DHI) is expected to report adjusted earnings of $1.71 per share on revenue of $5.58 billion
6:40 a.m. ET: Johnson & Johnson (JNJ) is expected to report adjusted earnings of $1.83 per share on revenue of $21.67 billion
6:55 a.m. ET: Raytheon Technologies (RTX) is expected to report adjusted earnings of 70 cents per share on revenue of $16.2 billion
6:30 a.m. ET: 3M (MMM) is expected to report adjusted earnings of $2.15 per share on revenue of $8.39 billion
7:00 a.m. ET: American Express (AXP) is expected to report adjusted earnings of $1.29 per share on revenue of $9.4 billion
7:30 a.m. ET: Lockheed Martin (LMT) is expected to report adjusted earnings of $6.42 per share on revenue of $16.95 billion
7:30 a.m. ET: Verizon (VZ) is expected to report adjusted earnings of $1.17 per share on revenue of $34.42 billion
4:00 p.m. ET: Texas Instruments (TXN) is expected to report adjusted earnings of $1.36 per share on revenue of $3.6 billion
4:05 p.m. ET: Capital One (COF) is expected to report adjusted earnings of $2.94 per share on revenue of $6.93 billion
4:05 p.m. ET: Starbucks (SBUX) is expected to report adjusted earnings of 55 cents per share on revenue of $6.92 billion
4:15 p.m. ET: Microsoft (MSFT) is expected to report adjusted earnings of $1.64 per share on revenue of $40.2 billion
4:15 p.m. ET: Advanced Micro Devices (AMD) is expected to report adjusted earnings of 47 cents per share on revenue of $3.02 billion.
European stocks rise despite concerns about COVID vaccine rollout [Yahoo Finance UK]