4 Heavily Short-Sold Stocks to Avoid Like the Plague

Whether you're a relatively new investor or have been putting your money to work in the market for decades, there's always something new to be seen.

Last year, investors navigated their way through the quickest decline of at least 30% in the S&P 500's history. They also relished in a ferocious bounce-back rally that sent the benchmark index to new all-time highs less than five months after hitting a bear market bottom.

This year, the volatility remains, albeit from a different source. Since roughly the midpoint of January, retail investors on Reddit's WallStreetBets (WSB) chatroom have banded together to buy shares and out-of-the-money call options on stocks with high short interest -- i.e., companies where institutional investors and hedge funds are betting on share prices to decline. The goal of the WSB community being to effect a short squeeze, thereby sending short-sellers scurrying to the exit all at once and exacerbating the upside in a heavily short-sold stock.

Continue reading

Source Fool.com