Every stock has bulls and bears. When trying to understand the bearish sentiment around a stock, looking at short interest can be particularly useful. This provides a measurement of how much bearishness there is around a stock, as short sellers are betting on the share price to fall.
Looking at stocks that have high short interest but are still trading near their 52-week high adds another layer of intrigue. It shows that short sellers have yet to be largely rewarded for their position, as the stock price has not yet fallen much. Short sellers may still be able to gain significantly if they are proven right.
Long or short positions in these types of stocks can be highly risky. High short interest and a share price near a 52-week high can signal a stock is significantly overvalued. It may be risky to go long. Stocks with high short interest can face a short squeeze. This can send shares skyrocketing, making short-selling risky. Below are three stocks that meet both these criteria.
PureCycle: Recycling Is Great for the Environment, But Can It Make Money?
First is PureCycle Technologies (NASDAQ: PCT). The stock is up nearly 250% in 2024, is trading just 10% below its 52-week high, and has a high short interest of 27%. In many respects, I am not surprised by the level of short interest in the company.
PureCycle has developed a technology to recycle a type of plastic, polypropylene (PP).
Traditional methods don’t recycle PP well, so landfills receive most of it. PureCycle hopes to eventually generate revenue by selling its recycled PP to manufacturers to make their products.
When thinking about the push, especially by large companies, to be more eco-friendly, it makes some sense in the long term. However, PureCycle is currently a company valued at over $2 billion with essentially $0 in revenue. This could be compared to a biotech firm that is waiting for approval for a drug. However, pharmaceuticals as an industry have shown they can be massively profitable, but in my view, recycling has not. Waste Management (NYSE: WM), the largest recycler in the US and Canada, lost $44 million from its "Recycling Processing and Waste" segment in 2023. This was despite it generating $1.2 billion in revenue. It's hard to say that PureCycle can ever be profitable when the largest recycler in the country struggles to do so.
NuScale Is One of the Hottest Nuclear Stocks, But Does It Have Staying Power?
NuScale (NYSE: SMR) is a nuclear energy company developing small modular reactors (SMRs). The stock is up over 550% in 2024, trading just 1% below its 52-week high and with a high short interest of 23%. NuScale’s business makes sense in theory as well.
Electricity demand is to increase drastically over the next several years, largely due to data centers powering AI. Data center companies prefer to use nuclear energy, as it is renewable and reliable.
However, building massive nuclear plants is very expensive and can take an extremely long time.
This gives NuScale a chance to help meet the demand. They could build smaller reactors that are faster and cheaper to construct. However, SMRs have faced significant difficulty in being commercially viable – none are so far online in the US. I believe SMRs are part of the future; Google (NASDAQ: GOOGL) agrees. It recently signed a deal to buy SMR energy from the privately owned Kairos Power by 2030. However, this doesn’t mean NuScale will be successful. It shows Google has belief in the general technology, but also raises the question, why didn’t they pick NuScale?
Trupanion: Can Pet Insurance Be Profitable?
Trupanion (NASDAQ: TRUP) is a pet insurance provider. It's up 79% in 2024, has 25% short interest, and is trading just 2% below its 52-week high.
Unlike the other two firms, it has hundreds of millions in quarterly revenue and is nearly profitable on a non-adjusted basis.
Still, it is a bit concerning that in an industry statistically designed to make money, the company is struggling to turn a profit.
The company is one of only five of the 80 U.S.-traded insurance stocks worth over $1 billion that have posted a net loss over the last 12 months. That’s the main source of concern for this stock. However, the pet insurance industry is growing strongly. This is driving significant excitement for this stock, which has still posted positive adjusted earnings per share over the last four quarters.
