Nikola (NKLA) is often featured on lists of the most-shorted stocks, and not without good reason. The stock has been falling to new lows, so short sellers have their reasons to love this ailing hydrogen fuel cell truck maker. That said, at times, buying heavily shorted stocks can be a good contrarian call, as these stocks often see short-squeeze rallies.
The term “short squeeze” became quite popular during the meme stock mania, where retail traders targeted heavily shorted names like AMC Entertainment Holdings (AMC) and GameStop (GME) to get the better of institutional investors. However, short-squeeze rallies are generally not sustainable, and stocks eventually settle near their fundamental values.
