Wells Fargo analysts believe a combination of tax refund spending, stronger earnings in lagging sectors, and fresh liquidity from the Federal Reserve could spark a “reflation” in equities.
In a note led by strategist Ohsung Kwon, the investment firm said heavily shorted names in the “Russell 3000” may be particularly well-positioned for a rebound.
With short interest elevated, any improvement in fundamentals could trigger sharp rallies. Among stocks it singled out are – Herc Holdings, Vera Therapeutics, and Matador Resources.
Wells Fargo rates all three at “overweight” and sees them as potential beneficiaries of an expected short squeeze ahead. Here’s what HRI, VERA, and MTDR have in store for investors in 2026.
Herc Holdings Inc (NYSE: HRI)
Equipment rental specialist Herc has endured a difficult stretch, with shares currently down more than 20% versus their 52-week high.
Much of this weakness has stemmed from its H&E acquisition, which initially created integration challenges. However, analysts believe those issues are now in the rearview mirror.
KeyBanc experts – for example – upgraded HRI stock in their latest research note to “overweight”, with a $200 price objective indicating potential upside of more than 20% from here.
According to the investment firm, the H&E deal synergies could reach $125 million by year two.
With IT systems integration complete and Salesforce stability restored, Herc shares appear better-positioned to capture efficiencies and deliver margin expansion.
For short sellers, that improving backdrop could prove painful in 2026.
Vera Therapeutics Inc (NASDAQ: VERA)
Biotech firm Vera Therapeutics has nearly doubled over the past two months, but Wells Fargo sees it pushing higher still over the next 12 months.
The company’s lead drug candidate, atacicept, is advancing toward commercialisation in a multi-dollar market.
BofA analysts maintain a “buy” rating on VERA shares, citing confidence in the therapy’s potential to exceed consensus expectations.
With biotech sentiment improving and short interest still elevated, Vera stock could benefit from both fundamental progress and technical tailwinds.
At the time of writing, it’s trading decisively above its major moving averages (50-day, 100-day, 200-day), which is often interpreted in technical analysis as a strong bullish signal.
Matador Resources (NYSE: MTDR)
Oil and gas producer Matador rounds out Wells Fargo’s basket of short-squeeze candidates.
The Dallas-headquartered firm has faced volatility alongside the broader energy sector, but experts argue its fundamentals remain intact.
Matador has steadily expanded production in the “Permian Basin” – while maintaining disciplined capital spending and shareholder returns.
Wells Fargo sees MTDR stock as undervalued relative to peers, particularly given its solid balance sheet and operational efficiency gains.
With shorts betting against Matador shares, any sustained rebound in oil, especially after the US-Venezuela conflict, could force rapid covering.
Note that MTDR currently pays a healthy dividend yield of 3.64% as well.
The post Wells Fargo sees short squeeze ahead: here are three stocks to play it appeared first on Invezz
