Are Cheap Stocks Worth The Risk?
Whether you call them penny stocks or simply “cheap stocks,” lower-priced company shares present a unique situation for traders. Ever since the introduction of low- and no-fee trading platforms like Robinhood, retail traders have found a place in the stock market today.
What’s more, these so-called Robinhood (NASDAQ: HOOD) stocks are a unique market segment on their own. Unlike larger brokerages like TD Ameritrade and Etrade, Robinhood restricts access to certain types of stocks.
While extremely high-risk cryptocurrencies like Shiba-Inu and Dogecoin are readily available, OTC penny stocks are still closed off. Obviously, Robinhood has its reasoning for doing this. However, it does mean that if you’re looking for cheap stocks to buy, you will have to stick with the NASDAQ and NYSE companies. So for anyone searching for things like “Robinhood penny stocks” or “cheap stocks on Robinhood,” understand that this will be the case.
Short Squeeze Stocks
This brings us to today’s focus: short-squeeze stocks. Now, low-priced stocks, in general, present a higher risk scenario just based on price action alone. If you consider the standard definition of penny stocks as stocks under $5, you understand that a few pennies can make a big difference.
Add in other potential catalysts like unusual trading volume or high short interest, and volatility can get amplified a bit more. GME and AMC stocks have made this phenomenon much more popular over the last two years. Just because a stock has higher short interest doesn’t mean it’s guaranteed to “squeeze.” But, to find potential short-squeeze stocks, the first step is identifying stocks with high short interest. This is what we’ll take a look at in today’s article.
Short Squeeze Stocks To Watch
Digital Brands Group Inc. (DBGI)
Shares of Digital Brands Group are no stranger to short squeezes. November saw the stock explode to new Q4 highs after reporting Q3 results. Sales rose year-over-year while net loss per share declined during that period. A financing round would ultimately spark selling in the penny stock, and DBGI shares have been trading relatively sideways since.
This week, the market picked back up as momentum continues carrying shares higher. Digital Brands recently signed and secured debt for providing the remaining funding for its acquisition of Sunnyside LLC – Sundry. It will be added to Digital Brands Group’s Bailey Shop, which is its eCommerce site. The company will also expand the Sundry brand in other verticals.
As far as a short squeeze stock, the market has yet to see such an event. However, looking at the short float data from a few sources suggest the short percentage is higher for DBGI stock. Fintel.IO has the figure sitting around 18%. Meanwhile, TDAmeritrade shows this at around 40%.
Blue Apron Holdings (APRN)
Like Digital Brands Group, Blue Apron is no stranger to the short squeeze trend. Shares of the meal kit company exploded to highs of over $8 before falling apart during the fourth quarter. Financing troubles have plagued the company as it continues expanding its retail reach beyond subscriptions.
The company’s recent launch of subscription-free meal kits on Amazon has helped promote some attention to the company. Blue Apron kits are also available to customers of Walmart through its online store. Earlier this year, the two linked up with a plan to offer subscription-free access to Blue Apron menu items.
One of the catalysts helping bring clarity on the funding front came earlier this quarter. One of the company’s largest investors, Joseph Sandberg, and his affiliates have committed to funding a purchase obligation of $55.5 million at $5.65 per share. Blue Apron has also begun cutting its workforce and seeking to drop expenses by $50 million next year.
Regarding the short squeeze focus, Fintel has APRN stock’s short float percentage at 46.56%. TDAmeritrade shows the figure higher at 51.4%.
Baudax Bio Inc. (BXRX)
Biotech penny stocks gained plenty of steam this quarter. A mix of big industry tie-ups and red-hot M&A deals helped boost sentiment. Baudax Bio caught a strong spark of momentum earlier this month thanks to news that it initiated a Phase 2 trial evaluating its BX1000 in patients undergoing surgery. The platform is designed to be a neuromuscular blockade that the company believes may allow for control of the time patients are under neuromuscular paralysis.
Management also explained in a December update that “To date, no serious adverse events have been reported in the first group of patients enrolled, and efficacy parameters have been recorded. We look forward to announcing the completion of the pre-planned first interim analysis of the BX1000 Phase 2 surgery trial early in 2023, with a target of completing full study enrollment by the end of March 2023.”
There was also some light insider buying catalysts in focus this week. CEO Geraldine Henwood purchased some shares on December 15th at an average price of $2.5476.
Should BXRX stock be on your list of short-squeeze stocks to watch? Both Fintel and TDAmeritrade show the short float percentage on BXRX stock hovering above 250%. Fintel shows 256%, while TD has this much higher at 283%.