The Top 3 Most Shorted Stocks in Canada Today

These TSX stocks may be up now, but short-sellers are betting they’re about to tumble in the next few weeks.

Amy Legate-Wolfe

Author Bio Amy became interested in investing in 2018 after having her first daughter. After receiving a masters degree in journalism from Western University, she became frustrated that the finance industry remained a confusing place for Canadians like her: new parents, millennials, and other young people who needed to understand their finances. Now, Amy focuses on tech companies and renewable energy for growth opportunities, coupling that with long-term investing strategies and equities. She also provides investors with a daily newsletter, Canada Stock Digest, for daily market updates. Her work can also be found at Canada's National Observer, where she writes on the business side of climate action. Before joining Motley Fool Canada, Amy wrote for major news organizations including HuffPost, CTVNews.ca, and CBC. When she’s not researching investing strategies, Amy’s time is pretty much monopolized by her two wild daughters, but in what little spare time she has she loves to do yoga, go on walks with her dog, and travel with her husband. Social Media Follow Amy on LinkedIn and Canada Stock Digest. Favorite Investment Quote “October: This is one of the particularly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August and February.” – Mark Twain

Published February 1, 2023 8:30 am EST

| More on: GOOSWEEDXIU

It’s an interesting time for investors getting into the market. On the one hand, optimistic investors may be looking at improving market conditions and believe that there is a positive future ahead! Yet others, including short-sellers, are certainly not as optimistic. In fact, some of the recent positive movement could be from these short-sellers closing out their positions.

Shorted stocks have done quite well lately. But what are short-sellers betting on these day? We’ll look at the three most shorted stocks on the TSX today and why investors are betting against them.

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Canada Goose

A whopping 26.8% of Canada Goose Holdings (TSX: GOOS) shares are short, with the stock currently identified, as potentially going through a short squeeze at the moment with shares up 31% in the last month alone.

Many believe the stock is due for some strength with COVID restrictions lessening in China, where the company expanded its business over the last few years. It’s now in overbought territory and could be due for a drop. That is exactly when short-sellers hope to swoop in.

What it depends on is whether or not investors decide to take out returns after earnings. Shares may indeed drop for Canada Goose stock should earnings come in lower than hoped for. Earnings are set to come out on Feb. 7, so investors should definitely hold off until then.

Canopy Growth stock

Another company going through a potential short squeeze is Canopy Growth (TSX: WEED). Major news caused Canopy stock to jump up over the last six months, with the United States seeing further moves towards decriminalization. Further, the company moved forward with its Acreage investment, which could also bring in more revenue.

Yet with 24.9% of its float dedicated to short-sellers, the recent climb of 24% in the last month alone could lead to a drop in the near future. And again, we have earnings on the way — due out on Feb. 9. So, Canopy stock will have to prove its current profit-making ventures are working.

Honestly, the last three quarters fell short of earnings estimates, so there could be quite the dip expected in the next week or so for short-sellers.

iShares S&P/TSX 60 ETF

Finally, short-sellers are betting against the TSX in general by investing in iShares S&P/TSX 60 ETF (TSX: XIU). About 22.8% of the float is made up of short-sellers, with shares up about 7% in the last month alone.

There are simply so many red flags that could spell out a drop in the near future. Poor earnings, an inverted yield curve, everything is pointing towards a recession. But that won’t be official until at least May, as we have yet to have a decrease in out gross domestic product (GDP) quarter over quarter. While it’s dropping, it’s not technically down … yet.

But that’s due to change in the relatively near future, and short-sellers are betting on it. In this case, when we see GDP results come out in March, there should be a decrease. If that happens, short-sellers are likely going to be rolling in it — but not the rest of us.