Wells Fargo recommends buying these highly shorted stocks

Published Wed, Jan 27 202111:32 AM ESTUpdated Wed, Jan 27 202112:56 PM EST

The flurry of trading activity in GameStop and other heavily-shorted names has captivated Wall Street as retail investors bid shares higher, prompting heavy losses for short sellers on the other side. As the mania spreads from GameStop to other names like AMC , fueled by commentary on Reddit boards , analysts at Wells Fargo compiled a list of stocks with high short interest — potential future short squeeze targets — that it remains overweight. Names like Carvana and Cheesecake Factory make the list — here are some of the others. The firm noted that short interest for the S & P 500 remains at historical lows, but that isn't stopping retail investors from piling into other corners of the market. According to Wells Fargo, both Carvana and Cheesecake Factory currently have short interest levels of 25.8%. That means more than a quarter of the shares available for trading (float) are being sold short. Shares of the online car seller slid more than 8% on Wednesday, while the restaurant stock jumped 8%. The rise of the retail investor has been a popular market narrative during the pandemic. With people stuck at home, many turned to online trading platforms as a way to pass the time. Brokerage firms have seen their users — and the typical activity of customers — jump in recent months as more and more people take up trading. Of course, trading can incur heavy losses, and some argue that investors who began trading during the depths of the pandemic have yet to experience a bear market. Chewy and Canada Goose are other names that Wells Fargo remains overweight, despite heavy short interest in each stock. Around 20% of the pet supplier's stock is currently sold short, while the retailer has a short interest of roughly 16%. Chewy jumped 7% on Wednesday, while Canada Goose was 1% higher. Short selling is a strategy in which investors borrow shares of a stock at a certain price in expectations that the market value will fall below that level when it's time to pay for the borrowed shares. - CNBC's Michael Bloom contributed reporting.

Source: NYSE

As the mania spreads from GameStop to other names like AMC, fueled by commentary on Reddit boards, analysts at Wells Fargo compiled a list of stocks with high short interest — potential future short squeeze targets — that it remains overweight.

Names like Carvana and Cheesecake Factory make the list — here are some of the others.