Why Fossil, Bed Bath & Beyond, and Macy’s Stocks Surged Today

What happened 

Shares of Fossil (NASDAQ:FOSL), Bed Bath & Beyond (NASDAQ:BBBY), and Macy’s (NYSE:M) soared 87%, 43%, and 12%, respectively, on Wednesday, as traders bid up the prices of many high short-interest stocks.

So what

A crowd of individual investors has piled into highly shorted stocks in recent days with the goal of igniting steep increases in their prices. They hope to pressure short-sellers — traders who have placed bets that generate profits if a stock’s price falls — into bailing out of their trades.

These so-called short squeezes can drive stocks’ prices even higher due to the dynamics of short-selling, which requires traders to buy the shares they sold short to close their positions.

Statues of a bull and a bear going head-to-head.

The bulls are battling the bears in a host of heavily shorted stocks. Image source: Getty Images. 

After pummelling short-sellers who bet against companies like GameStop and AMC Entertainment, these bear-hunters now appear to be driving up the prices of other highly shorted stocks, including Fossil, Bed Bath & Beyond, and Macy’s. 

Now what

Despite their gains on Wednesday, these downtrodden retail stocks remain high-risk investments. The threat posed by e-commerce to traditional retailers did not suddenly disappear. Macy’s, Bed Bath & Beyond, and Fossil still face enormous challenges as they struggle to adapt to changing consumer preferences.

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Moreover, short squeezes eventually end. When they do, stock prices tend to move toward valuations that reflect the fundamental performance of their underlying businesses. For Bed Bath & Beyond, Macy’s, and Fossil, those prices are likely far below where their shares now trade.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

View more information: https://www.fool.com/investing/2021/01/27/why-fossil-bed-bath-beyond-and-macys-stocks-surged/

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