Reflecting on the historical short squeeze of video game retailer GameStop (NYSE: GME) in January 2021, Danish researchers unveiled a report on the arXiv.org open-access archive for scholarly articles. The study outlined the impact of the subreddit community WallStreetBets (WSB) in fueling GME’s surge from single-digit values to over $80 within a span of three weeks.

The report highlighted the substantial engagement of the WSB community in the stock market, with their total GME positions estimated to be at least 1% of the company’s market capitalization.

While the fervor around WSB might have subsided, the impending IPO of Reddit indicates its integration into the investment sphere’s core. Amidst this backdrop, a glimmer of intrigue emerges as investors search for the next short squeeze candidates.

MGP Ingredients (NASDAQ: MGPI) recently ventured into producing its own liquor brands following the acquisition of Luxco, a renowned bourbon manufacturer, for $475 million in April 2021. This strategic move aimed to pivot towards higher-value offerings.

In a subsequent development, the Luxco division acquired Penelope Bourbon for $105 million plus contingent payouts of up to $111 million based on specific performance metrics. Penelope, which registers an annual sale of 50,000 cases, exhibited remarkable growth, surging over 160% year-over-year.

Despite skeptics questioning MGPI’s premiumization strategy, the company reported enhanced financial metrics in 2023. The firm’s gross margin expanded by 610 basis points to 42.5%, while its adjusted operating income soared by 21% to $180.3 million, marking a sturdy 21.6% operating margin.

MGPI’s commendable performance positions it as a promising candidate for a potential short squeeze.

Established in 1989, Encore Wire (NYSE: WIRE) hails as a Texas-based manufacturer of copper and aluminum building wire catering to residential, commercial, and industrial construction sectors. The company went public in July 1992, initiating trading at around $3 per share.

An early supporter of Encore, I endorsed the stock in December 2022, alongside other small-cap equities, projecting its continual market share expansion. Notably, Encore’s shares have surged by 59% over the past 15 months, outperforming the S&P 500 by 29%.

Despite grappling with a challenging year characterized by a 17.8% dip in the average copper wire selling price in 2023, Encore mounted a partial recovery fueled by a 6.7% uptick in copper shipment volumes. Consequently, the firm witnessed a 15% revenue decline to $2.57 billion, resulting in a contraction of its gross profit margin from 36.9% to 25.5%.

While market dynamics dictate price fluctuations, Encore has maintained a sturdy balance sheet with no long-term debt and $560.6 million in cash and equivalents as of December 31. This financial fortitude, coupled with its short interest of 22.87% of float as of February 15, elevates Encore Wire’s appeal as a potential short squeeze candidate.

Celsius Holdings”>

Revolutionizing the Energy Drink Market

Celsius Holdings (NASDAQ: CELH) has seen a meteoric rise in its stock value, up 61% in 2024 and an astonishing 5,387% over the past five years. It stands as the modern-day reincarnation of Monster Beverage (NASDAQ: MNST).

Securing Solid Backing

With PepsiCo (NASDAQ: PEP) throwing its weight behind Celsius, investing $550 million in convertible preferred shares in August 2022, which come with a 5% annual dividend and the option to convert into 8.5% of the company’s common stock at $75 per share, Celsius now has a formidable U.S. distributor on its side.

Expanding Global Reach

In a decisive move, Celsius announced its expansion into Canada through Pepsi and into the UK and Ireland through Suntory Beverage & Food in January 2024, showcasing its strategic growth vision and market penetration.

Impressive Financial Performance

Boasting revenues of $1.32 billion in 2023, a staggering 102% increase from the previous year, Celsius demonstrated its robust financial health. North American revenues surged by 105%, while international revenues witnessed a commendable 52% growth. The company’s gross margin also saw a substantial increase of 660 basis points year-over-year, reaching 48.0%.

Comparative Earnings Growth

Celsius recorded an impressive 316% jump in adjusted EBITDA to $295.6 million, translating to an EBITDA margin of 22.4%. While Monster Beverage’s EBITDA margin for 2023 stood at 28.5%, 610 basis points higher than Celsius, the latter exhibits significant potential for further growth in the coming years compared to its stagnant competitor.

Investor Sentiment

Despite having 36.31 million shares sold short, which represent 22.81% of its float, Celsius remains a less favorable candidate for shorting among the trio discussed herein. The company’s upward trajectory and strategic positioning make it a compelling choice for investors seeking long-term growth potential.

About the Author

Will Ashworth has been immersed in investment writing since 2008, contributing to reputable publications such as InvestorPlace, The Motley Fool Canada, Investopedia, and Kiplinger, among others. Based in Halifax, Nova Scotia, Ashworth specializes in designing enduring model portfolios that withstand the test of time.