The Canadian stocks we’ve dug up could see an upward spike in their stock prices as a result of a short-covering rush
SmallCapPower | September 16, 2020: Investors who want to make money if a stock price falls can sell a security short – borrow shares from their broker, sell them, and eventually buy those shares back, hopefully at a lower price. Brokers do charge borrow fees for this privilege, which can be quite steep depending on the quality and popularity of the shares being loaned. A short squeeze occurs when a bullish event causes short sellers to quickly buy back their shares, causing an upward spike in the stock price. The three Canadian stocks we’ve identified today are top short-squeeze candidates due to their large short positions, sizable paper losses year to date and, in some cases, high stock borrowing costs.
*Returns are based on closing stock prices as of September 15, 2020
Lithium Americas Corp. (TSX:LAC) – $11.53
Lithium Americas is developing the Caucharí-Olaroz project in Argentina with 50/50 joint venture partner, Ganfeng Lithium. Following the close of the Transaction, Ganfeng Lithium will increase its interest in the Caucharí-Olaroz to 51%, with Lithium Americas holding the remaining 49%. In addition, the Company is developing the 100%-owned Thacker Pass in Nevada, which Lithium Americas claims is the largest and highest-grade known sedimentary lithium deposit in the United States. LAC stock has an aggregate short interest of $642 million with total short-seller paper losses of $295 million year to date. Its stock has an annual borrowing cost of 42.8%.
- Year-to-Date Return: 177%
New Gold Inc. (TSX:NGD) – $2.46
New Gold is an intermediate gold mining company with a portfolio of two core producing assets in Canada: the Rainy River and New Afton Mines. The Company also holds an 8% gold stream on the Artemis Gold Blackwater project located in British Columbia and a 6% equity stake in Artemis. The Company also operates the Cerro San Pedro Mine in Mexico (in reclamation). New Gold recently closed the sale of its Blackwater Project to Artemis Gold Inc. for total cash consideration of $190 million. NGD stock has an aggregate short interest of $424 million with total short-seller paper losses of $232 million year to date.
- Year-to-Date Return: 114%
Endeavour Mining Corporation (TSX:EDV) – $38.15
Endeavour Mining is a multi-asset gold producer focused on West Africa, with two mines (Ity and Agbaou) in Côte d’Ivoire, four mines (Houndé, Mana, Karma and Boungou) in Burkina Faso, four potential development projects (Fetekro, Kalana, Bantou and Nabanga) and a portfolio of exploration assets on the Birimian Greenstone Belt across Burkina Faso, Côte d’Ivoire, Mali and Guinea. EDV stock has an aggregate short interest of $2 billion with total short-seller paper losses of $808 million year to date.
- Year-to-Date Return: 56%
Disclosure: Neither the author nor his family own shares in any of the companies mentioned above.
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