Sometimes even companies that are in secular decline or ones that seem destined for bankruptcy can take the market by surprise. All of these stocks are struggling, making them seem like good short interest candidates. When expectations are in the basement, however, one fluky positive data point or buyout rumor can send shares soaring.
Often, these surprise jumps are compounded by blindsided short sellers that are forced to close out their positions. The result can be epic short squeezes like the one in November that sent DryShips Inc. (NYSE:DRYS) stock from under $4 to above $100 and then back below $5 in a matter of days.
DRYS had a massive amount of short interest. For quite some time, the company has seemed destined for bankruptcy. A spike in the Baltic Dry Index, however, was enough to ignite an epic rally that torched short sellers.
Here’s a look at three other stocks that are just too dangerous to short.
Don’t Short These Stocks: Fitbit (FIT)
There are plenty of reasons to suspect Fitbit Inc (NYSE:FIT) won’t survive on its own in the long-term. Revenue growth has steadily declined, falling 14.1% in the last quarter. Earnings growth, too, has been negative, falling 42% year-over-year.
From a practical standpoint, FIT is the David to Apple Inc.’s (NASDAQ:AAPL) Goliath. Fitbit’s devices are a one-trick pony compared to the Apple Watch. The Apple Watch has a huge ecosystem built around it. And even the Apple Watch has struggled to gain traction in the market. The idea that FIT can compete with Apple and its resources and market presence is a bit of a stretch.
Fitbit may not be able to compete with Apple, but Nike Inc (NYSE:NKE) or Under Armour Inc (NYSE:UAA) could be potential suitors under the right circumstances. Rumors have already circulated this year. Potential short sellers should remember that it doesn’t take an actual deal to send a stock soaring 50% or 100%. Just look at where Twitter Inc (NYSE:TWTR) shares have been on buyout rumors alone.
Fitbit stock currently has the dangerous combo of an incredibly high 31.6% short percent of float and rock-bottom market expectations. At this point, FIT stock is simply too dangerous to short.
Don’t Short These Stocks: Office Depot (ODP)
Office Depot Inc (NASDAQ:ODP) may not have the short-squeeze potential that other stocks do, but it remains…
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