All eyes have been on shares of Tupperware Brands Corp. and Yellow Corp. in recent days as the stocks have soared despite a dearth of fresh news in the case of the former, and negative news in the case of the latter.<\/p>\n
Shares of the\u00a0beleaguered\u00a0maker of iconic food-storage containers enjoyed a record 434% gain in July on no apparent news. Yellow\u2019s stock Over the weekend the Wall Street Journal reported that the less-than-truckload company has shut down operations as it prepares for bankruptcy. On Monday the International Brotherhood of Teamsters said it was served legal notice that Yellow was \u201cceasing operations and filing for bankruptcy.\u201d MarketWatch has reached out to Yellow with a request for comment.<\/p>\n Related:<\/strong> How \u2018left-for-dead\u2019 Tupperware became a buzzy trading play<\/p>\n Set against this backdrop, the surging share prices for Tupperware \u201cLiterally, it\u2019s short covering, as the paired trade of long quality, short junk unwinds,\u201d she told MarketWatch, via email. \u201cAnd it typically always precedes volatility.\u201d<\/p>\n Short selling of a stock occurs when an investor borrows shares and sells them immediately expecting the price to drop. The shares can then be repurchased and returned to the lender, with the investor pocketing the difference. Although sometimes vilified, short sellers are actually misunderstood, Robert Sloan, managing partner at\u00a0financial analytics firm S3 Partners and author of \u201cDon\u2019t Blame the Shorts,\u201d recently told MarketWatch. <\/p>\n Related:<\/strong> Short selling stocks \u2014 and trying to play short squeezes \u2014 can be very dangerous<\/p>\n In a letter to investors this week, Dan Loeb, the chief executive of the hedge-fund firm Third Point, explained that short selling is much more challenging today than it has been historically. <\/p>\n \u201cFundamental analysis is increasingly taking a back seat to monitoring daily option expiries and Reddit message boards, as evidenced by the numerous short squeezes and manipulations of heavily shorted stocks such as AMC and GameStop in 2021 and others this year,\u201d he wrote. \u201cWhile we have not abandoned short selling, we continue to reduce our single-name short exposure in favor of market hedges and short baskets.\u201d<\/p>\n LaDuc explained that in June and July hedge funds aggressively covered shorts in global equities, and also noted the trend of FOMO, or fear of missing out. <\/p>\n \u201cWe have had the largest six-month increase in leverage on record (according to Goldman), with a clear case of FOMO-the-MOMO [momentum] chase in full view as concentration risk in megacap tech forced a NASDAQ \u201cSPECIAL REBALANCE\u201d to \u2018down-weight\u2019 AAPL, MSFT, GOOGL etc.\u201d<\/p>\n Related: <\/strong>Short sellers are not evil, but they are misunderstood <\/p>\n Short covering occurs when a person with a short position buys back the shares, ending the short trade, and returns the shares to the seller. With this strategy, the short seller aims to cover after the share price falls and make a profit. They may also cover if the price goes up to limit their losses. <\/p>\n Last week LaDuc told MarketWatch how she was able to anticipate a Tupperware stock spike despite a dearth of traditional market-moving news around the name.<\/p>\n Tupperware\u2019s stock has continued its upward trajectory, rocketing again on Tuesday. The stock eventually ended Tuesday\u2019s session up 26% at $5.38, with LaDuc warning her clients of the risks involved in a parabolic rally. \u201cI suggested to clients it was likely done and to be very cautious if still long because \u2018Parabolas are trapped longs that can trigger volatility which can trigger a liquidation event\u2019.\u201d<\/p>\n Related:<\/strong> Yellow\u2019s stock quadruples in 2 days even after reports that bankruptcy is coming <\/p>\n Shares of Tupperware are down 23.2% Wednesday. Yellow Corp.\u2019s stock, which ended Tuesday\u2019s session up 121.6%, is down 17.3% Wednesday.<\/p>\n With regard to Yellow Corp. LaDuc attributes its recent stock movements to insider and Wall Street manipulation. \u201cLow priced, low-float stocks are VERY easy to push around,\u201d she told MarketWatch.<\/p>\n Bankrupt companies such as Bed Bath & Beyond Inc. \u201cThey are clearly retail investors, largely on the Robinhood\u00a0 Related:\u00a0<\/strong>Tupperware stock skyrockets to a record 434% gain in July <\/p>\n Hertz Global Holdings Inc. Typically in a bankruptcy, shareholders are wiped out as creditors take control of the remaining assets. But those investors were rewarded when the company got a big capital injection and was able to resume trading on an exchange.<\/p>\n The investor behavior around these types of stocks has caught the attention of academics. Victor Ricciardi, visiting finance faculty at Tennessee Tech University and co-author of the new book \u201cAdvanced Introduction to Behavioral Finance,\u201d recently described some of the behaviors that can prompt investors to purchase bankrupt stocks.<\/p>\n \u201cRepresentativeness bias refers to when past performance influences how an individual perceives an investment,\u201d Ricciardi told MarketWatch via email last month. \u201cIn particular, a person makes a general assumption about a small sample of information or experience.\u201d<\/p>\n
\n YELL,
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\n has also skyrocketed, despite reports that the trucking company is facing bankruptcy.<\/p>\n
\n TUP,
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\n and Yellow have sparked comparisons with the meme stock phenomenon, where discussions on social media can send share prices surging. This trend turned companies such as AMC Entertainment Holdings Inc.
\n AMC,
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\n and GameStop Corp.
\n GME,
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\n into meme stock \u201cdarlings\u201d in recent years. But Samantha\u00a0LaDuc, founder of\u00a0LaDucTrading.com, says there\u2019s a different explanation for what\u2019s been happening to shares of Tupperware and Yellow.<\/p>\n
\n BBBYQ,
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\n have even proven attractive to some investors recently, sparking comparisons with the meme stock phenomenon.<\/p>\n
\n HOOD,
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\n \u00a0platform, that are readers of Reddit,\u201d Howard Ehrenberg, a bankruptcy and reorganization practice partner\u00a0at law firm Greenspoon Marder, told MarketWatch last month. \u201cThey are people buying on rumor and hoping that by participating in a mass purchase binge, they will make money.\u201d<\/p>\n
\n HTZ,
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\n which filed for bankruptcy protection in 2020 and\u00a0exited bankruptcy\u00a0the following year, also fueled meme-stock comparisons, when mostly retail investors piled into the stock during the bankruptcy process. <\/p>\n