One might think that bearish sellers have burst the market’s bubble, but these stocks are still overpriced

Don’t expect a repeat of the 2021 meme stock short squeeze. Given that short sellers have increased their bets against GameStop GME, some investors are
and AMC Entertainment Holdings AMC,

In January 2021, it was becoming increasingly difficult for short sellers to find stocks to borrow for the short sale. Those who wanted to limit their losses had to pay ever higher cover prices. Back then, GameStop’s stock soared more than 2,700% in less than a month. AMC’s stock is up 966%.

Today, GameStop’s short ownership (shares sold short) as a percentage of total free float has risen to 24.5%, its highest level in a year, according to FactSet. AMC is right behind at 21.3%.

The reason I doubt another big short squeeze is imminent traces of academic research on stocks that are most likely forming bubbles that are about to burst. During last year’s short squeeze, GME and AMC moved into bubble territory, and while both stocks have fallen significantly since then, the deflation of their respective bubbles is most likely still ongoing.

Justified “The Dynamics of Disagreement’, the academic study was conducted by three finance professors: Kent Daniel from Columbia Business School, Alexander Klos from the University of Kiel and Simon Rottke from the University of Amsterdam. Daniel is a former co-chief investment officer of Goldman Sachs.

To identify bubble candidates, the researchers focused on high-flying stocks where the market is particularly inefficient. In such cases, the normal checks and balances of the market are disrupted, which can result in prices deviating significantly from fair value. When the bubble of such stocks bursts, the decline can be long — up to five years, according to the study.

In particular, the professors focused on a group of stocks that have trailing 12-month returns higher than any other publicly traded stock and for which relatively few stocks are available in the stocklending market. This makes it more difficult for traders to find stocks to borrow and then sell short, with the result that the normal attraction exerted by short sellers is largely, or even mostly, absent. Without that pull, there’s a good chance such stocks will move into bubble territory.

When I reported on this research for Barron’s in August 2021, both GameStop and AMC were among the likely bubble candidates — a group the professors call “limited winners.” Since this column appeared, shares of these two companies are down 27.9% and 67.8%, respectively, versus a 15.3% drop in the S&P 500 SPX.
(These calculations include dividends reinvested.) The average return for the 25 restricted winners listed in the Barron column is a 61.4% loss. (All returns by June 13th.)

Current bubble candidates

To create a list of current stocks with caveats, I’ve followed the professors’ approach as closely as possible, courtesy of FactSet. Of all US stocks listed, 40 have earned this dubious honor. That total is down from 131 last August, suggesting there are far fewer bubble candidates these days.

The table below lists 25 likely bubble candidates with the highest trailing 12-month returns.


Market capitalization (in million US dollars)

12 months right of return

Houston American Energy Corp. (HUSA)



High Peak Energy Inc (HPK)



Comstock Resources, Inc. (CRK)



CVR Partners, LP (UAN)



SilverBow Resources Inc. (SBOW)



Value Line, Inc. (VALU)



Focus Universal Inc (FCUV)



Ring Energy, Inc. (REI)



Albertsons Companies, Inc. Class A (ACI)



Indonesia Energy Corporation Limited (INDO)



Penske Automotive Group, Inc. (PAG)



RPC, Inc. (RES)



Pilgrim’s Pride Corporation (PPC)



Lightwave Logic, Inc. (LWLG)



SigmaTron International, Inc. (SGMA)



Datto Holding Corp. (MSP)



Cyxtera Technologies, Inc. Class A (CYXT)



DCP Midstream LP (DCP)






Marin Software, Inc. (MRIN)



Nebelhorn Therapeutics, Inc. (FHTX)



Euroseas Ltd. (ESEA)



Gore’s Guggenheim, Inc. Class A (GGPI)



East Stone Acquisition Corp (ESSC)



Tootsie Roll Industries, Inc. (TR)



(Market Value and Yields as of June 13, 2022)

Mark Hulbert is a regular contributor to MarketWatch. His Hulbert Ratings tracks investment newsletters that pay a flat fee to be audited. He can be reached at

Plus: Short sellers raise bets against GameStop and AMC to highest levels in a year as Wall Street sees more pain ahead

Also read: Those who buy stocks on the day the S&P 500 goes bearish have earned an average of 22.7% over 12 months One might think that bearish sellers have burst the market’s bubble, but these stocks are still overpriced

Brian Lowry

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