The most heavily shorted stock could keep rallying

Trading heavily shorted stocks
Trading heavily-shorted stocks   

It's been game on for the most heavily shorted S&P 500 stock.

Shares of GameStop are up 27 percent in 2015, but 42 percent of the available shares are currently held short, which makes it the most heavily shorted stock in the S&P 500 by a wide margin.

"People really hate it," commented analyst Michael Pachter, who covers the video game sector for Wedbush Securities. "People are convinced that physical sales [of video games] are going away and digital sales will overwhelm them and they won't ever sell a game again—and so far, that view is wrong."

Indeed, the extremely bearish market sentiment around the stock may make it easy for GameStop to keep rising.

After GameStop handily beat earnings estimates in May, Janney Capital Markets analyst Tony Wible wrote in a research note: "These results will be more than enough to support GME's stock in the face of massive pessimism."

GameStop isn't the only heavily shorted stock that's done well this year. Among the three most heavily shorted, Transocean and Cablevision Systems have also beaten the market this year, with 4.3 percent and 15.2 percent rallies, respectively.

However, while analysts as a whole are measuredly bullish on GameStop, those covering Transocean appear to have a lot more agreement with the short-sellers. According to FactSet, the most common rating is "underweight," and the average target price is $14.20—26 percent below Monday's closing.

Shares of the battered drilling services company will turn around "once the debt overhang is resolved, and the rig market will most likely turn in late 2016—which is too far away for an investment today," Canaccord Genuity analyst Alex Brooks predicted in an email to CNBC.com.

Indeed, for this analyst, the heavy short interest is not much of a mystery.

"The right question is, why would you own it?"

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