Swaggy's Top Stonks
Swaggy’s Top Stonks. We compile and analyze data from multiple sources bringing you the top trending tickers from around the internet. If you haven’t subscribed already, please do so below.
Swaggy's Top Stonks
May 31, 2021
Welcome newcomers to Swaggy's Top Stonks and thank you for subscribing. We've got a lot to cover in this edition so let's jump right into it.
What's in this week's letter
Sponsored Post (lithium boom)
Market Update (short-squeeze edition)
Short-Interest Stocks
Unusual Options Activity
TheStonksHub DD Sample - SoFi (recent SPAC merger)
This week's trending tickers
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Market Update - Short-Squeeze names are back
This week was absolute mayhem with Gamestop and AMC leading the way of the "short-squeeze" pack. Gamestop ended the week up 25% while AMC closed at 110% (180% at peak Friday morning). Here's a look at their 5-day charts.
Gamestop (GME)
AMC - AMC Entertainment
Just how "hyped" was AMC chatter this week? Let's look relative to the start of the short squeeze back in January. Here's a chart that shows the total number of mentions. In January AMC was hitting about 18k mentions per day whereas last week it peaked between 6-8k for both Thursday and Friday.
Additionally, it was interesting to see 7 of the top 20 trending stocks on WallStreetBets were short-squeeze plays.
The difficult situation with short-squeeze plays are that FOMO takes over any rationale or reasonable thinking. Friday morning when AMC was trading over $33 and over 150% in just the last 4 days a trader asked me if now was too late to enter a position. I declined to answer because I am not a financial advisor or investment professional, but personally I tend to avoid stocks that have shot up over 100% in 2 days.
Today I'll look at FUBO and CLOV two of the other trending tickers and possible short-squeeze plays that haven't exploded with the AMC/GME crowd. I will be using data from HighShortInterest.com, which isn't the most accurate, but gives a general idea of what short percent and the total shares float look like.
The full report and all-inclusive list (FUBO, CLOV, ROOT, SPCE, SDC) will be posted on my partner site, TheStonksHub. We've recently reduced our pricingto remain competitive with similar services and we're offering this one time discount to become a subscribed member for just about 40 cents a day ($12.99/month). Sign up with the discount link and get started on the free trial.
What is TheStonksHub?
Weekly stock research (sample DD on SoFi posted below) that provides an unbiased bird's eye view into a companies addressable market, growth, and business model
Weekly macro-trends & outlooks
Unusual options trades breakdown
Other interesting content (such as this short-interest report)
By popular demand expanding soon into small/mid-cap stock research
Short Interest Stocks
FUBO - FuboTV
FUBO became a popular retail name back in November of 2020 when the stock spiked from $27 to roughly $65 in just a few days and then corrected itself even faster. Here's a look at the 6m chart.
Short interest is currently ~21%
Here's a historical look at the short-interest on FUBO (source: Fintel). Which is showing it's been in the 20-35% range since November.
CLOV - Clover Health
Clover health has also been a "WallStreetBets fav" over the last few months. I don't think I've ever seen any chatter that didn't revolve around the terms "short squeeze". The stock is currently down over 50% since January.
Short interest is currently ~36%
Here's a historical look at the short-interest on CLOV (source: Fintel). Short interest has recently spiked to the current levels of ~35%. It's clear from this chart the volatility of short-interest on this name is quite high.
Final Thoughts
In my non-professional opinion, it's difficult to justify entering a position on AMC and Gamestop after these recent moves. For any retail trader it can be hard to not get caught up in this hype and think of all the "easy money" you can make. Any short interest play will be a high-risk, high-reward move and might not be suitable for everyone.
One thing I do like about the stocks I mentioned above is they all have similar characteristics:
These stocks have been making new lows while AMC and GME rip significantly higher
As these stocks go lower, short interest is actually increasing. Do the players shorting them think they will drop to $0? They will need to cover at some point.
Pretty small shares float at around 110 million each. Ideally you would want less than 50-75 million, but 110 million is still relatively small.
As the stock price continues to drop I look at the risk-reward as becoming more and more enticing for a risky squeeze play. Please read the not financial advice disclaimer at the bottom because any kind of position entered in hopes of a short-squeeze will have significants amount of risk.
Unusual Options Activity
Last week I introduced a new platform I've been implementing into my trading, VigTec. They have a handful of quality features that range from live charts, exploring new stocks in different industries, and unusual options activity. If you haven't yet, check out their 7-day free trial here. I also posted this guide to Reddit with a more in-depth look of how to use all the different features.
One thing that has caught my attention were the accumulation of call options in Gold and Silver, not just yesterday, but consistently over the last 2-3 weeks. This comes off the back of Biden announcing a 6 trillion budget for new infrastructure and makes me wonder if some players are worried about what is going to happen to the dollar after all this spending. Here's a look at option activity throughout the top traded sector ETFs where the biggest bets were placed around precious metals.
DD Bites - Powered by TheStonksHUb
TheStonksHub posted a very detailed report on SoFi's business model, TAM, and competitive moat in the industry. I already mentioned the full StonksHub platform above, but they just recently launched a (free) Substack Newsletter that provides bite-sized due diligence on a weekly basis. You can upgrade to premium at any time or remain on the free plan. Use it to get an idea of what the featured company does and who their competition is. Please note that becoming a paying member on either platform gives you access to the premium version of the newsletter and vice-versa. Here are this week's "DD Bites", featuring SoFi who just announced a confirmed merger with the SPAC ticker IPOE.
SoFi : The Future of FinTech
SoFi's business model and moat surround 3 different segments:
Lending: Personal/student loans and refinancing
Tech Platform: Galileo acquisition and payments infrastructure
Financial Services: Investing, credit cards, money transfers, etc
Traditional banks are able to cross-sell these products to their existing customers and are still losing market share to FinTech startups. According to Morgan Stanley, fintechs are “unburdened by legacy IT costs [and] can offer financial services up to 50% cheaper”.
A few trends are providing tail-winds to the FinTech industry, which include:
46% of people are now accessing financial services through digital platforms(which increases to 82% among millennials).
In 2013, fintech leaders were responsible for 5% of personal loans, in 2019 they were responsible for 38%
Total digital payments grew from $4.1T in 2019 to $5.1T in 2020, a 25% increase in just one year.
SoFi's been a beneficiary from these tailwinds as they've been growing their customers base at an average of 66% YoY.
What was mentioned above paints a picture that FinTech is disrupting traditional firms across all avenues of financial services (loans, investments, and banking). Traditional banks are failing to keep ahold of the new generation of customers coming into the market. SoFi is able to circumvent the inefficiencies in our current financial systems and provide unparalleled customer service for all their services.
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