3 Penny Stocks That Investors Are Betting Against in 2021
Finding penny stocks with high short interest is not new by any means. But, this year, a major paradigm shift occurred with this method. If you’ve traded penny stocks or any stocks in 2021, you probably witnessed the meteoric rise of GameStop Corp. (NYSE: GME), AMC Entertainment Holdings Inc., (NYSE: AMC), and most recently, BlackBerry Ltd. (NYSE: BB).
These companies all had massive short interests, and investors decided to bet against it. This resulted in a gain in the thousands of percentage points in only a short time frame. And because of that, retail traders gained a new power of having an actual sway in the market. So, what exactly is short interest?
What Are High Short Interest Penny Stocks?
In short (no pun intended), this is the number of shares that investors have bought as ‘shorts’. In the case of GameStop for example, several large institutional funds decided to buy shorts as a way to bet on the company’s impending failure. This made sense as GME was on the verge of collapse.
People no longer went to stores to purchase video games, and GME stock declined as a consequence. However, investors, mostly on Reddit, decided to come together to save their favorite video game store due to an emotional attachment to it. Additionally, these investors wished to beat out the institutional hedge fund as a symbolic resistance to Wall Street.
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Since then, many investors of both penny stocks and blue chips, have searched for the next GME stock. This first involves creating a penny stocks watchlist of companies with high short interest. With shorted stocks, one of the best indicators is the number of shares shorted in the float. This is the percentage of shares in the market compared to the total freely trading shares. This is a great indicator of how many investors are shorting a company. A high short float for example would be anything over 15%.
It’s worth noting that these stocks are usually quite risky. And, with so many betting against them, it can be even riskier. But, with that in mind, the potential to see profits is also palpable. For these reasons, let’s take a look at three penny stocks with high short interest right now.
3 Penny Stocks to Watch With High Short Floats Right Now
- Senseonics Holdings Corp. (NYSE: SENS)
- GTT Communications Inc. (NYSE: GTT)
- Digital Ally Inc. (NASDAQ: DGLY)
Senseonics Holdings Corp. (NYSE: SENS)
Short Float: 27.37%*
Senseonics Holdings is a penny stock that we’ve been covering for months at this point. And with social media search volume up 600% according to HypeEquity, there’s a good reason for that. It’s worth noting that SENS is a producer of technology used in diabetes care. This includes insulin monitoring which can be done all from a smartphone. While its products are interesting, the social sentiment surrounding SENS stock could be even more so.
Some traders on Reddit have discussed that SENS stock could reach as high as $6 if the short squeeze continues. While this is mostly speculation, it is not out of the question considering the meteoric rise of other aptly named meme stocks. Over the past six months, shares of SENS have shot up by a more than staggering 750% to its June 15th price of $3.69. In the past month alone, Senseonics has increased in value by over 88%.
One thing to consider is that because it is both a meme stock and a highly shorted penny stock, it can be quite volatile. Only a week or so ago, the company announced that its Eversense Glucose monitoring device showed a hypoglycemic detection rate of around 93%. This is very encouraging, especially in an industry where minutes matter. So, considering its groundbreaking technology and high popularity, will SENS be on your penny stocks watchlist?
GTT Communications Inc. (NYSE: GTT)
Short Float: 22.38%*
Despite being down by around 8% today, shares of GTT stock have climbed by over 35% in the past month. GTT Communications is almost considered a tech penny stock for its expertise in membrane containment systems. However, it participates mostly in the transport and storage of liquefied gases.
Its products are used in LNG carriers, floating terminals, offshore storage tanks, and multi-gas carriers. Additionally, it offers smart-shipping solutions for natural gas and similar products. While the demand for fuel was understandably low during the pandemic, it is now climbing back up to pre-Covid levels.
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While it is impossible to predict when it will reach new heights, many investors expect demand to increase substantially in the near future. Interestingly enough, GTT also provides services for the hydrogen industry, which has become a popular source of renewable energy. Last month, it announced that it supports SGN’s cloud transformation by offering both managed network and security services to one of the largest natural and green gas distributors in the U.K.
“We chose GTT as our strategic partner due to its advanced cloud networking expertise and broad portfolio of service, which are critical to the success of our “all-in” cloud transformation strategy.”
Andrew Quail, Director of IT and Innovation at SGN
This move is an important one for the company and could help with the further adoption of GTT’s products in Europe. Whether this information makes GTT stock worth watching, however, is up to you.
Digital Ally Inc. (NASDAQ: DGLY)
Short Float: 13.94%*
Another penny stock we’ve been talking about for months now is Digital Ally Inc. If you’re unfamiliar, let’s talk about what DGLY does. It’s difficult to pinpoint just one market that DGLY operates in because its business is quite broad. On one hand, Digital Ally is a specialist in designing and manufacturing high-quality video recording equipment and analytic software. These products are used in everything from law enforcement to emergency services and event security.
On the other hand, the company recently announced the Shield Health Protection Product line which includes a whole slew of products aimed at combatting the pandemic. This includes everything from gloves to face masks and electrostatic sprayers for disinfecting large areas.
And, last week it announced the creation of Digital Ally Healthcare Inc., which builds upon this endeavor. The goal with this is to provide consistent and sustainable revenue growth despite the effects of the pandemic or lack thereof. A few days before this announcement was made, the company entered into a venture with Nobility LLC, a revenue cycle management company for the medical industry. The goal with this venture is to first begin with two target acquisitions and then pursue more down the line.
“Healthcare represents approximately $3.5 trillion or 18% of the U.S. economy annually. Last year we added the Shield Health Protection Products line to address parts of the health and wellness market.”
Stan Ross, CEO of DGLY
It’s clear that Digital Ally is not subject to one market but rather prefers to broaden its brand and market base. It’s worth noting that DGLY is also frequently mentioned as a penny stock on Reddit and other social media sites. With all of this in mind, DGLY could be an interesting penny stock to watch moving forward.
Are High Short Penny Stocks Worth It?
Finding the best penny stocks to watch all comes down to your investing strategy. If you’re risk-averse, then high short penny stocks may not be right for you.
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However, if you’re looking for a penny stock to buy that carries high volatility, looking for highly shorted stocks could be a smart choice. Regardless, know what type of trader you are and how to use that to your advantage. With that in mind, what do you think? Are high short penny stocks worth it?
*All short float data provided by Finviz on Tuesday, June 15th
