It’s been a tough year for those in the business of shorting stocks, as a feared recession hasn’t arrived, which has allowed the beaten-down of Corporate America to survive, if perhaps not thrive. According to HFR, hedge funds have returned just 3% this year, which makes sense given the terrible results for managers who are shorting securities.
Call it a dash for trash, or speculative excess. Carvana shares on Wednesday popped by 40% as the loss-making used car retailer restructured its debt, in a year in which its stock has climbed, no joke, 1,077%.
Who could’ve foretold such stellar gains? Well, Carvana
CVNA,
was one of the stocks that was screened by this author earlier in the year as a so-called lottery stock. Then again, another name the screen threw up was Silvergate Capital, where shareholders have been entirely wiped out as the crypto-focused lender collapsed. Which is what you would expect from lottery plays — big winners and big losers.
Research shows that lottery-like stocks typically are overpriced and have low average returns. But for this screen, there is no evaluation of a company’s balance sheet or future prospects — just the underlying trading activity in the stocks.
A research paper from authors including Alok Kumar of the University of Miami notes that, if all market participants were passive investors, the ratio of dollar volume to market cap would be equal for all stocks. So, look for the stocks with the highest turnover ratios to find the most speculative stocks.
And this is the result when screening New York Stock Exchange- and Nasdaq-listed stocks, with market caps of at least $500 million. Heading the list is Nikola, the EV truck maker, and Virgin Galactic, which is trying to send tourists into space. And this year the average performance for the 20 names on here is a stellar 86%.
| Ticker | Name | Average volume to market cap | YTD % gains |
|
NKLA, |
Nikola Corporation | 5,152.5 | 19.9 |
|
SPCE, |
Virgin Galactic Holdings Inc | 3,709.0 | 14.4 |
|
WE, |
WeWork Inc. Class A | 2,928.7 | -80.0 |
|
SOUN, |
SoundHound AI, Inc Class A | 2,829.6 | 103.4 |
|
CLOV, |
Clover Health Investments Corp. Class A | 2,469.8 | 25.9 |
|
MARA, |
Marathon Digital Holdings Inc | 1,883.0 | 414.3 |
|
FCEL, |
FuelCell Energy, Inc. | 1,787.7 | -13.7 |
|
CLSK, |
Cleanspark, Inc. | 1,718.7 | 241.7 |
|
FUBO, |
fuboTV Inc. | 1,699.5 | 78.7 |
|
LILM, |
Lilium N.V. Class A | 1,517.3 | 16.7 |
|
TLRY, |
Tilray Brands, Inc. | 1,422.5 | -34.2 |
|
LUMN, |
Lumen Technologies, Inc. | 1,373.6 | -63.8 |
|
TMC, |
TMC the metals company Inc. | 1,298.7 | 148.1 |
|
CRBU, |
Caribou Biosciences, Inc. | 1,284.8 | 6.8 |
|
APLD, |
Applied Digital Corporation | 1,105.4 | 356.5 |
|
OPEN, |
Opendoor Technologies Inc | 1,096.2 | 262.9 |
|
NVAX, |
Novavax, Inc. | 959.0 | -21.1 |
|
PACW, |
PacWest Bancorp | 895.7 | -56.6 |
|
RIOT, |
Riot Platforms, Inc. | 893.3 | 458.4 |
|
AGEN, |
Agenus Inc. | 851.4 | -27.8 |
|
HPP, |
Hudson Pacific Properties, Inc. | 848.7 | -40.7 |
| Source: FactSet | |||
The market
The Nasdaq 100 contract
NQ00,
was weaker after the Netflix and Tesla results, but the other major stock futures contracts
ES00,
NQ00,
were mixed. The yield on the 10-year Treasury
TMUBMUSD10Y,
was 3.80%.
For more market updates plus actionable trade ideas for stocks, options and crypto, subscribe to MarketDiem by Investor’s Business Daily.
The buzz
Netflix stock
NFLX,
slumped 6% as the streaming service provider reported weaker-than-forecast revenue, even as subscriber numbers topped estimates.
Tesla shares
TSLA,
weakened 4% as the electric vehicle maker’s margins suffered from price cuts that helped push sales higher.
IBM
IBM,
reported lighter-than-forecast revenue and free cash flow.
Thursday’s earnings schedule includes Johnson & Johnson
JNJ,
which boosted its outlook for the year, Travelers
TRV,
which reported a surprise loss, and after the close, Capital One
COF,
Initial jobless claims fell by 9,000 to 228,000, as the Philadelphia Fed manufacturing index was little moved at -13.5, on a scale when any reading below zero indicates deteriorating conditions.
A tornado heavily damaged a major Pfizer
PFE,
pharmaceutical plant.
Best of the web
A union has filed a complaint against a staffing app that penalizes workers who strike.
The activist investor Elliott is taking a big stake in a contract drug maker.
Investors haven’t b een this bullish since before the 2022 bear market, Vanguard finds.
Top tickers
Here were the most active stock-market tickers on MarketWatch as of 6 a.m. Eastern.
| Ticker | Security name |
|
TSLA, |
Tesla |
|
NFLX, |
Netflix |
|
CVNA, |
Carvana |
|
NVDA, |
Nvidia |
|
TSM, |
Taiwan Semiconductor Manufacturing |
|
MULN, |
Mullen Automotive |
|
AAPL, |
Apple |
|
GME, |
GameStop |
|
NIO, |
Nio |
|
AMC, |
AMC Entertainment |
The chart
Investors are piling into a long-duration Treasury ETF
TLT,
Russell Clark, a trader turned blogger, says the ETF now is only “for the brain dead and [willfully] blind.” Politics right now is all about spending or tax cuts, he says, and central banks will need to keep interest rates high in response to that. “What makes TLT such a bad bet for me is that you are saying that you think either a second Biden or second Trump administration is going to be totally different, and this will cause yields to fall. Rishi Sunak is totally different to Liz Truss, and yet yields have not fallen. And for me it would be quite easy to see 30 year treasury yields rise to 6%, especially if Trump introduces unfunded tax cuts, which I see as likely,” he says.
Random reads
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