Meme trade revival: Avis, Bed Bath lead gains in stocks with big short bets this week

Published Thu, Nov 4 20218:33 AM EDT

Huge rallies in Bed Bath & Beyond and Avis Budget reignited the meme stock mania that swept Wall Street earlier this year, as stocks with heavy short interest targeted by retail traders jumped in unison this week. The group of the most heavily shorted stocks sports an average gain in the double digits this week. Bed Bath & Beyond shares have skyrocketed nearly 39% this week after the retailer announced a new partnership with Kroger as well as a separate digital platform. Avis has soared a whopping 72% this week alone after the car rental company posted a huge earnings beat and expanded its stock buyback plan. The duo are popular short targets among hedge funds betting against their struggling business models and fundamentals. When they jump sharply higher in prices, short sellers are forced to buy back shares in order to limit their losses. The short covering tends to fuel the stock's rally further. The excitement and trading frenzy seemed to be spreading to other heavily shorted stocks. Online chatrooms like the infamous WallStreetBets on Reddit are lit up with enthusiastic comments as stay-at-home traders encourage one another to pile in stocks with big short bets, aiming to squeeze out short sellers. A slew of these stocks are on track for a huge winning week. The 20 stocks with the highest short interest as a percentage of float shares in the S & P 1500 have rallied 12.7% on average week to date, according to FactSet data. PetMed Express has the highest short interest among S & P 1500 stocks with over 27% of its available shares sold short. The stock is up 12.6% this week. Some of the stocks on the lists have been retail-trader favorites since the first wave of the meme mania, such as iRobot, National Beverage and AMC Networks. The big leg up in some of these stocks are leaving Wall Street analysts' targets in the dust. A few Bed Bath & Beyond and Avis analysts downgraded the stocks this week, saying the massive gains are unjustified by the companies' fundamentals.

A passenger boards an Avis shuttle bus at Los Angeles International Airport.

Patrick T. Fallon | Bloomberg | Getty Images

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