Understanding Short Interest in Stocks
Short interest refers to the **percentage** of publicly available shares that have been sold short. This metric serves as an **indicator** for many investors in determining how strong a company’s bear thesis may be. Given the **nature** of short selling, short interest has become a popular indicator among investors.
The Significance of High Short Interest
The weight given to high short interest is justified as investors betting against a stock typically conduct in-depth **research** and are confident in a company’s downfall. These short-sellers face unlimited risks, which is why attention is paid when influential investors or smart money take short positions. Investigating the **red flags** that might have influenced the elevated short interest is common practice among cautious investors.
Researching Underperforming Stocks
Our analysis delved deeper into the factors revealing where **smart money** perceives potential trouble. To compile our list of **20 underperforming stocks targeted by short sellers**, we focused on the worst-performing stocks over the past six months and ranked them by their short interest.
Caleres, Inc. Overview
**Caleres, Inc.** (NYSE:CAL) operates as a **developer**, **designer**, **manufacturer**, **sourcer**, and **seller** of footwear. The company generates its revenue through two main segments: the **Brand Portfolio** and **Famous Footwear**. Their range includes private-label, licensed, and branded athletic, dress, and casual footwear products.
Recent Performance and Challenges
The company’s recent sales performance demonstrates challenges, with **Famous Footwear** comparable sales decreasing by **3%** and **Brand Portfolio** sales declining by **7%**. High fixed costs coupled with declining sales contribute to margin pressures; **Caleres’** operating margins diminished significantly from **5%** to **2%** in the fourth quarter, and for the full year, the margins fell by **5.8%**.
Capital Allocation and Financial Risks
The capital allocation decisions at Caleres highlight further risks. In **2024**, the company chose to prioritize **shareholder** returns over debt repayment, leading to an increase in its debt from **$190 million** to **$220 million**. The recent acquisition of **Stuart Weitzman** is expected to cost around **$105 million**, escalating debt by **50%**. This brand, currently unprofitable, will demand significant investments, likely placing further strain on margins.
Ranking Among Underperforming Stocks
Overall, **CAL** ranks **12th** on our list of underperforming stocks targeted by short sellers. While we recognize CAL’s potential as an investment opportunity, we believe certain **AI stocks** exhibit greater promise for generating higher returns within a shorter timeframe. For example, an AI stock has appreciated since early **2025**, while many popular AI stocks have dropped by approximately **25%**. If you’re interested in a more promising AI stock trading at less than **5 times its earnings**, our report on the cheapest AI stock offers valuable insights.