7 short-term stocks for a May rally
A practice designed only for the most daring traders, the best short-term stocks to buy now could generate huge gains. Admittedly, approaching this sector means facing the possibility of severe losses. Yet, due to the extreme risks involved, the rewards could be massive.
To understand why, when bulls invest in a company, the risk is always that the security could drop to zero. However, no upward price cap theoretically exists. Therefore, when the bears take the bet on the opposite side, they can incur unlimited liability. To avoid this prospect, they must cover their short positions by buying back the target stock. So an attractive list of short-term stocks generates a lot of attention.
Of course, you also need to realize that when stocks come under downward pressure, there’s a reason for it. Usually it’s not good. So it’s always possible that short-term stocks on Reddit or any social media platform will continue to drop. Such is the life of the contrarian. If you don’t mind, you might be ready for these short-term actions today.
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Worldwide Acceptance (WRLD)
To be 100% clear, I can go both ways with Worldwide acceptance (NASDAQ:WRLD), which offers consumers personal loans. Understandably, with the Federal Reserve implementing a hawkish monetary policy — which involves raising the benchmark interest rate to fight inflation — companies making loans should be suspect. Obviously, as borrowing costs rise, fewer people will want to borrow money.
At the same time, when the Fed raises rates, it also increases the prospect of a recession. And during economic hardship, people need loans. Therefore, it is possible that WRLD ranks among the best short-term stocks to buy now. According to Benzinga data, WRLD has a short stake of 52.88% of its free float. Moreover, its short-term interest rate stands at 10.9 days to cover. Both stats are high, especially the first one.
Interestingly, WRLD has already gained 73% in equity value since the start of the year. However, the onset of a recession could attract a cynical demand for global acceptance. So, might belong on your short-term action list.
Editas Medicine (EDIT)
A clinical-stage biotechnology company, Editas Medicine (NASDAQ:EDIT) intrigued by his therapies for rare diseases. Leveraging CRISPR gene-editing innovation, Editas ranks among the most relevant and compelling short-term stocks to buy now. At the same time, market performance has been unstable. Since the beginning of the year, EDIT has gained more than 10% of its capital value. However, last year it was down more than 15%.
Nonetheless, Editas reasonably argues for the best short-term actions due to the possibility of medical breakthroughs. In the open market alone, biotech stocks can skyrocket in the blink of an eye based on positive clinical data. With a short press, the sky is the limit.
According to Benzinga, EDIT’s short interest is 41.54% of its float. Moreover, its short interest rate is 9 days to cover. While analysts view EDIT as a consensus, their upside price target sits at $15.33. This implies over 64% upside potential. Therefore, you should keep it on your short-term action list.
A popular cineplex operator, Cinemark (NYSE:CNK) naturally suffered greatly from the Covid-19 crisis. While other business categories were able to adapt to the circumstances, Cinemark and its ilk suffered at one point a total loss of demand. Even now, with the pandemic all but over, a struggling consumer market worries Hollywood. Therefore, it’s no surprise to see CNK emerge as one of the best short-term stocks.
Still, if a recession were to materialize, Cinemark could work just fine. Essentially, the business can benefit from the breakout angle. During the Great Recession, Hollywood struggled. However, evidence indicates that it has weathered the storm better than many other industries. Plus, you get what you pay for at the box office. According to Benzinga, CNK’s short interest reached 37.9% of its free float. Moreover, its short-term interest rate is rather high at 10.2 days to cover.
Notably, analysts consider CNK a Moderate Buy. Their average price target sits at $19.20, implying nearly 14% upside potential. So, it could be one of the short-term stocks to buy now.
An intriguing but also challenging company, online retailer of pet products Soft (NYSE:CHWY) is relevant because let’s face it: Americans love their pets, maybe a little too much. At the same time, this gripping tale hasn’t been too kind to CHWY so far this year. Since the January open, CHWY has fallen almost 11%. So, it’s no surprise to see it on a short-term stock list today.
Adding to the skepticism, MarketWatch reported in late March this year that CHWY had fallen as its underlying earnings release showed declining customer numbers and no expected earnings growth. However, the underlying pet products and services industry continues to impress with revenue of $136.8 billion in 2022. So if you go against the grain, CHWY could rank among the best short-term stocks to buy. Currently, CHWY’s short interest is at 36.32% of its free float. Additionally, its short-term interest rate is 5.7 days to cover, which is not all that remarkable but still high by normal levels.
Beyond Meat (BYND)
Another tantalizing opportunity among the best short-term stocks for contrarian investors, Beyond meat (NASDAQ:BYND) initially enjoyed strong support. And why not? Consistently, consumer surveys indicate that more than half of millennials are ready to eat (or already eat) plant-based foods. Unfortunately, the market doesn’t care. Since opening in January, BYND has lost more than 13% of its net worth. Over the past year, it has dropped by 56%.
I don’t want to sound cavalier about the downside pressure BYND is facing. Currently, plant-based meat lacks economies of scale. Therefore, the alternative industry cannot keep pace with the established animal protein players. However, over time, this narrative could change. Perhaps this momentum could carry Beyond Meat higher, assuming it can survive the current financial onslaught.
For now, BYND carries a short stake of 33.25% of its free float. Its short-term interest rate is somewhat high at 7.8 days to cover. Just beware that it gets no love from Wall Street analysts, who rate BYND a moderate sell. It’s really your choice, but it could be on the daredevil’s list of short-term stocks.
Beauty Health (SKIN)
For avant-garde mavericks, Beauty and health (NASDAQ:SKIN) might be worth considering as one of the best short-term stocks. On the surface, the beauty care specialist may seem too risky. For example, a recent article by The Wall Street Journal pointed out that the return to the office has stalled. Therefore, with millions of workers still working remotely, the need for beauty products is theoretically diminishing.
However, with the increase in layoffs, this situation may not last indefinitely. As well, the WSJ earlier this year pointed out that the market for remote workers has shrunk. In other words, people might be forced to socialize with others again. And that could give SKIN a cynical boost.
This is a tricky example of short-term stocks to buy now, I won’t deny. However, the statistics intrigue me. Currently, SKIN’s short position stands at 32.57% of its free float. Moreover, its short-term interest rate ratio hit double digits at 10.3 days to cover.
With a pet insurance company Trupanion (NASDAQ:TRUP) – which focuses on medical insurance coverage for cats and dogs – a disclaimer is required. If you’re looking for the best short-term stocks to buy for extreme upside potential, TRUP might be it. On the same width, TRUP can easily put you in a bad house if you’re not careful. So please trade responsibly.
Now, what’s appealing about Trupanion is the same broad thesis that supports Chewy. Not only do Americans adore their pets, but they open their wallets to all products and services. Plus, millennials have become the best pet parents. Given the general lack of social skills of young people, animals are better companions for them than humans.
On paper, TRUP has a short interest of 33.22%. Its short-term interest ratio is 9.8 days to cover. While that sounds “awesome,” just keep in mind that TRUP has hemorrhaged 54% year-to-date. Over the previous year, it fell by almost 68%. So you are taking a big risk here if you consider it one of the short-term stocks to buy now.
As of the date of publication, Josh Enomoto had no position (directly or indirectly) in the securities mentioned in this article. The opinions expressed in this article are those of the author, subject to InvestorPlace.com Publication guidelines.