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3 Heavily Shorted Stocks That Are Down More Than 75% Since 2021. Can They Turn Things Around?
Investing in struggling stocks that are also heavily shorted can be an incredibly risky move. But if these types of stocks are able to turn things around and prove their doubters wrong, the upside can also be significant. It’s not a suitable investment strategy for most investors, but if you have a high risk tolerance, there are three potential contrarian plays to consider.
Medical Properties Trust (NYSE: MPW), Beyond Meat (NASDAQ: BYND), and Plug Power (NASDAQ: PLUG) are three beaten-down stocks that many short-sellers are betting will continue to struggle. Below, I’ll look at just how heavily shorted these stocks are, what has to happen for them to turn things around, and whether they are worth potentially investing in today.
Medical Properties Trust: 50% short interest
A real estate investment trust (REIT) can sometimes be an attractive investment for its recurring dividend income and stability. But a REIT is only as stable as its tenants. And Medical Properties Trust is a REIT which has had problems with key tenants in the past, including Steward Health, which filed for bankruptcy protection earlier this year.
The turbulence in Medical Properties’ earnings has resulted in a disastrous performance for the stock, which is down a whopping 79% since 2021. And while the REIT has distanced itself from Steward Health and is relying on new tenants, short interest remains incredibly high at around 50% of the stock’s float.
For Medical Properties to turn things around, it needs to prove that it can get back to generating positive earnings numbers and that its new tenants are much safer. The healthcare REIT has incurred a net loss for three consecutive quarters. It’ll take time for Medical Properties to demonstrate it’s a safer option for investors, and with the company cutting its dividend twice since last year, it won’t be easy for many investors to trust this stock.
With interest rates potentially coming down further next year, I think there could be a contrarian play here as REITs may become more attractive investments amid lower rates. And with so much bearishness priced into its valuation, Medical Properties may not have to perform too well to impress the market these days. This is a highly risky stock, but there are reasons to consider taking a chance on it. The safe option, however, would be to wait at least a couple of quarters to see if Medical Properties is able to find some stability in its earnings.
Beyond Meat: 40% short interest
Another heavily shorted stock is Beyond Meat. The fake meat company hasn’t been doing well for multiple reasons. Not only has demand been unimpressive, but its gross margins are also often negative, which makes it difficult to see a path to profitability for the business anytime soon. With short interest as high as 40%, investors clearly aren’t believing the hype around Beyond Meat’s plant-based foods. Since 2021, Beyond Meat has lost a staggering 95% of its value; it’s nearly impossible for the stock to have performed worse since then.
In the trailing 12 months, Beyond Meat’s net loss of $314.4 million is nearly as high as its revenue of $317.8 million. Unfortunately, there’s no easy way to see a turnaround for Beyond Meat. It needs a plant-based product that is in high demand and for which it can charge a high enough price to significantly bolster its margins. And until that happens, it’s difficult to even see a path for a turnaround.
This food stock may be too risky an investment, even for contrarian investors.
Plug Power: 29% short interest
Shares of Plug Power are also down more than 90% since 2021 as the hype surrounding hydrogen energy has crumbled drastically in recent years. The company has reported massive losses, which make Beyond Meat’s numbers almost look decent. Over the past four quarters, Plug has incurred a net loss of nearly $1.5 billion on sales of $684.5 million. And like Beyond Meat, it regularly reports a negative gross margin, which is a huge red flag for investors. Short interest in Plug Power is just under 30%.
If you’re a believer in hydrogen energy, you might be tempted to take a chance on Plug Power. But the risk is that the company may not be around even if hydrogen energy takes off and becomes the preferred power solution in the future. While Plug Power may boast about a leadership position in the hydrogen industry, that hasn’t amounted to a strong financial position for the business, and that’s what’s arguably more important for investors.
Plug Power reported $285.2 million cash (including restricted cash) as of the end of June. And for a company that has burned through $422.5 million in just the past six months from its day-to-day operating activities, the problem is clear: The business needs to drastically slow its cash burn and cut expenses. Regardless of the potential in hydrogen, it’ll be all for naught if Plug Power continues to accumulate these types of losses. That’s why I think it may be the riskiest stock on this list, and the one which may have the hardest path to turning things around.
Without clear evidence of a significant improvement in its financials, this is a stock that you’ll probably want to steer clear of.
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David Jagielski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Beyond Meat. The Motley Fool has a disclosure policy.
3 Heavily Shorted Stocks That Are Down More Than 75% Since 2021. Can They Turn Things Around? was originally published by The Motley Fool
The habits of millionaires are a topic of interest when it comes to financial advice. After all, unless they received a large chunk of money as an inheritance or gift, most millionaires had to be smart with their money to get where they are.
Learning how millionaires accumulate wealth — and where they keep it — can provide valuable insights for anyone focused on growing their money. One common question is whether or not millionaires keep money in checking accounts.
Studies show that in recent years, millionaires are keeping a significant portion of their wealth in cash. According to CNBC’s , that portion was about 24% in 2023. While this doesn’t necessarily mean a quarter of a millionaire’s wealth is sitting in a checking account, it does indicate the importance of maintaining liquid assets. And a checking account can be a helpful tool for doing so — whether or not you’re a millionaire.
Anyone, regardless of net worth, can find value in a checking account. Checking accounts allow unlimited deposits and withdrawals, check writing, bill pay, and other features to help you manage your money day-to-day.
While millionaires may keep large portions of their wealth in other deposit accounts and investments, some may use a checking account to manage daily spending. Millionaires also recognize the importance of having liquid assets, like funds in checking and savings accounts. Accessible cash lets you cover unexpected expenses without needing to sell off investments, borrow money, or pay a penalty for tapping your retirement savings early.
The amount of money a millionaire keeps in their checking account is highly personal and depends on preference. However, because checking accounts rarely earn competitive — if any — interest, some millionaires intentionally limit their checking account balance. Some may choose to keep the bare minimum, such as a couple of months’ worth of essential expenses, in their checking accounts, keeping the rest of their wealth in more lucrative assets.
Regardless of preference, it would be surprising for a millionaire to keep more than $250,000 in a single checking account. That’s because the Federal Deposit Insurance Corp. (FDIC) only insures up to $250,000 in deposits per institution, per account holder.
While millionaires may use checking accounts for day-to-day financial transactions, they may also use some of the following accounts in addition to, or in place of, a checking account:
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Savings accounts: Like checking accounts, savings accounts provide a high degree of liquidity, allowing you to access your money as needed for regular or unexpected expenses. High-yield savings accounts, in particular, give millionaires an extra bang for their buck. Some of the best accounts currently offer rates upwards of 4% versus the national average savings account rate of 0.46%.
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Cash management accounts: Cash management accounts (CMAs) pay competitive interest rates while maintaining more accessibility than a savings account. Some CMAs come with a debit card and ATM access, and many provide extended FDIC coverage limits by “sweeping” additional deposits into partner banks. CMAs are available at brokerages, not banks, facilitating easy transfers between investment and cash accounts.
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Money market accounts: Similar to CMAs, money market accounts combine features of checking and savings accounts, often paying competitive interest rates and providing check writing and ATM access. Banks and credit unions offer these accounts, which are federally insured. Minimum opening deposit and minimum balance requirements are often higher than those for standard savings accounts.
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Retirement and tax-advantaged accounts: Millionaires understand the importance of investing for their later years, and retirement accounts such as 401(k)s and IRAs allow them to do so in a tax-advantaged way. Some retirement accounts, like 401(k)s, are offered by certain employers. Others, such as traditional and Roth IRAs, are available to anyone.
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Brokerage accounts: The IRS limits contributions to tax-advantaged accounts, and millionaires typically invest beyond these limits. They do so with taxable brokerage accounts, which can hold investments such as stocks, bonds, and mutual funds without contribution limits.
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Other investments, like real estate, commodities, and art: Some millionaires may decide to diversify their portfolio with other investment types. These could include real estate investments, such as investment properties or real estate investment trusts (REITs); commodities, such as metals or energy products; art; and more.
The amount of money millionaires keep in their checking accounts depends on personal preference. While some millionaires may keep six figures in their checking account to maintain a comfortable cash cushion, others may choose to keep the bare minimum in checking. You wouldn’t expect millionaires to keep more than $250,000 in a checking account, however, because balances over this threshold aren’t typically insured.
There’s no single bank that’s a favorite among millionaires; it’s another matter of preference. However, millionaires are likely to bank with institutions that offer private banking to those who meet specific financial requirements. Private banking may include wealth planning services, waived fees, dedicated bankers, and additional perks. J.P. Morgan Private Bank, Citi Private Bank, and Bank of America Private Bank are among some of the most popular banks for millionaires.
Billionaires may have checking accounts, but they likely use accounts that cater to ultra-high-net-worth individuals. These accounts may come with perks such as a dedicated banker, waived fees, and competitive interest rates. Alternatively, billionaires may opt for a cash management account with higher FDIC insurance coverage limits and checking account features.
No rule says you can’t have a million dollars in a checking account, but FDIC insurance typically only covers up to $250,000. Plus, you can get a bigger return on your investment by keeping $1 million elsewhere. One alternative is a cash management account, which acts like a checking account but generally earns higher interest. Plus, many cash management accounts insure more than the standard $250,000 by sweeping funds into multiple partner banks.
Lumen Technologies, Inc. (NYSE:LUMN) shares are trading higher on Monday after the company announced it is partnering with Meta Platforms, Inc. (NASDAQ:META) to significantly increase Meta’s network capacity and help drive its AI ambitions.
Lumen’s partnership offers Meta enhanced flexibility with secure, on-demand bandwidth, supporting its complex computing requirements and enabling it to serve billions daily.
Ashley Haynes-Gaspar, Lumen’s EVP and chief revenue officer, said, “We’ve transformed our company to meet this demand. As Meta’s customers use more AI services across its platforms, we’re helping provide Meta with a seamless, effortless, and flexible network that will meet its growing needs.”
Lumen Technologies said its Private Connectivity Fabric enables long-term network capacity for Meta’s AI.
Alex-Handrah Aimé, director of Meta’s Network Investments stated, “Our AI tools are performing increasingly more complex tasks including enabling conversations in a variety of languages and translating text to images in real time, while helping people interact with the world around them in new, immersive ways.”
Lumen will report third quarter 2024 results on November 5, 2024.
Investors can gain exposure to the stock via Invesco S&P SmallCap Utilities & Communication Services ETF (NASDAQ:PSCU) and First Trust Cloud Computing ETF (NASDAQ:SKYY).
Price Action: LUMN shares are up 9.50% at $7.38 at the last check Monday.
Image via Shutterstock
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This article Lumen And Meta Join Forces To Boost AI With Flexible, On-Demand Network Solutions originally appeared on Benzinga.com
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