Skillz Inc (NYSE: SKLZ) is screaming for the top in the market this morning, following up on the strong gains the stock experienced yesterday. While the company hasn’t issued any press releases or SEC filings, it didn’t have to. Instead, it received support as a result of Cathie Wood and her firm, Ark Invest, purchasing millions of shares of the stock. Here’s what’s going on:
Ark Invest Gives Skillz Stock A Boost
Ark Invest, managed by Cathie Wood, announces the trades they make on a daily basis, rather than waiting to submit SEC filings and keeping investors largely in the dark until those take place.
Yesterday, Ark Invest purchased more than 5 million shares of Skillz stock in the open market, largely helping to drive the price for the more than 33% run it took yesterday.
So, why is this such a big deal?
There are a few factors at play here:
- Return Rate. Cathie Wood is no amature in the world of investing. In fact, she is ranked as one of the best fund managers in the world, known for generating outsized returns that smash overall market averages.
- Going Against The Grain. Woods is known for going against the grain, which is overwhelmingly appealing to investors these days considering the war between retailers and hedge funds.
- Little Money Follows Big Money. Many investors make it a point to follow the moves of institutional investors. After all, by following the institutions, these investors have the ability to generate similar returns to what big money is generating. The fact that Woods and Ark invest share their moves in the market daily, rather than through outdated press releases, investors have a better ability to match returns.
For these reasons, when Ark Invest and Cathie Woods make moves in the market, retail investors tend to follow suit. So, when Ark said it invested in more than 5 million shares of SKLZ, it was no surprise that retailers jumped all over the opportunity.
What Is Skillz?
Skillz is an online, mobile, multiplayer platform giving consumers the ability to compete against players around the world and test their skills. The platform is becoming overwhelmingly popular, being incorporated in several games available on both Android and iOS.
Is This A Short Squeeze?
In general, when looking for short squeeze opportunities, I look for stocks with short interest above 20%. With short interest around 10%, Skillz stock doesn’t necessarily fall into that category.
Nonetheless, this isn’t the average play.
While short interest on the stock sits at 10%, there’s a strong chance that a short squeeze will push the vast majority of those shorts out of SKLZ. The reason is simple. Those who are short aren’t only going to have to contend with retailers here, they have to contend with one of the most well respected fund managers in the world.
As a result, I would venture to say that at least some of the gains have been caused by shorts running for cover, and that there’s plenty more room for growth ahead as short sellers continue to abandon ship.
The Bottom Line
The bottom line here is simple. Skillz represents an exciting opportunity. The mobile gaming market is a vast and growing one, and the company is quickly becoming a leader in that space.
Beyond the company itself, the fact that Ark Invest has jumped in head first is exciting news. After all, Cathie Wood has a history of making significantly profitable trades, and this one isn’t likely to be any different.
All of that combined with the potential for a major short squeeze makes SKLZ stock one to watch very closely ahead.