Short selling allows investors to bet against a company by borrowing and selling its shares. This causes the stock to underperform, but it can also trigger explosive growth because of something called a "short squeeze" -- which happens when a growth catalyst makes shares quickly rise, forcing short-sellers to cut their losses and buy back borrowed shares at a higher-than-expected price. A company's short interest represents how much of its float is currently sold short. Virgin Galactic (NYSE: SPCE) and Revolve Group (NYSE: RVLV) are two heavily shorted stocks that look poised for a short squeeze because of their compelling growth drivers.
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Virgin Galactic is a small-cap company that focuses on space tourism and point-to-point hypersonic travel. Many investors are shorting the shares on concerns over the company's lack of revenue and significant cash burn, but it is well-positioned to execute on its ambitious strategy because of its access to capital and the pent up demand for its services.
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2 Heavily Shorted Stocks Poised for a Short Squeeze