Most Shorted US Stocks Amid High Valuations

US stocks have been buoyed this week by solid earnings from tech firms, bringing back concerns about high valuations as investors look for potential selling opportunities.

Ten of the Most Shorted US Stocks

• Hims & Hers Health (HIMS) 37.9% shorted
• RH (RH) 38.1% shorted
• 3D Systems (DDD) 27.8% shorted
• Kohl's (KSS) 31.2% shorted
• ia (BBAI) 25.3% shorted
• FuboTV (FUBO) 24.6% shorted
• IonQ (IONQ) 23.2% shorted
• Camping World (CWH) 24.0% shorted
• Wolfspeed (WOLF) 28.9% shorted
• Robert Half (RHI) 38.1% shorted

Markets At Dizzy Heights Thanks to Tech

US indices are surging higher this week, thanks to solid earnings from tech companies, despite a more hawkish Fed and increased tensions in the Middle East. Those gains are concentrated mainly in AI-based stocks, which have accounted for the vast majority of the gains seen in the bull market. The S&P 500 has risen to new record highs, and its P/E ratio recently surpassed 30x, the highest level since the pandemic. Naturally, there is a growing number of investors searching for likely candidates to sell, which has led to an increase in short interest in more precarious stocks lately. In general, those companies are likely to underperform and present sell opportunities. But a large concentration of sell orders can offer an opportunity for a short squeeze, a perennial interest among retail traders. The return of the bull market has attracted renewed interest from retail traders, who are jumping in this month, increasing volatility and the number of bear bets. Rising short interest could increase selling pressure on particularly vulnerable stocks and generate trade opportunities. Here's why there is so much interest in selling some of the ten most shorted stocks in the US:

Him & Hers Health Losing Weight as Market Flourishes

HIMS was a solid bet a couple of years ago, amid the explosion of interest in GLP-1 weight-loss drugs like Ozempic, and producers simply couldn't keep up with demand. The high cost of the drugs also increased demand for alternatives or "copycat" weight loss programmes that Hims & Hers offered. But the supply issues have been resolved, and multiple weight-loss alternatives have prompted investors to recalibrate their valuation of the company. Add on the suit from Novo Nordisk over patent infringement, which could lead to lengthy legal costs, and the firm is facing notable challenges, even as it tries to pivot to a broader offering. Analysts, however, haven't given up on the company, with the majority taking a neutral stance as its share price is nearly exactly the price target. That might change when Hims & Hers Health reports earnings on May 11th.

Robert Half Suffering Amid Hiring Slump

The hiring firms are on the dark side of the AI boom, as an already soft labour market is under additional pressure from expectations that the LLMs will replace workers. Many major firms are reducing their workforces, with Goldman Sachs saying AI was responsible for 5,000 to 10,000 redundancies a month. While all firms in the space are facing challenges, Robert Half has attracted significant short interest because it was losing money even before the AI surge. The company failed to meet revenue projections for Q1, and unless there is a major shift in the market, it might not see any good news until next quarter. That could keep downward pressure on the stock.