Communication Services sees rising short interest; other high-return sectors don’t.

When examining S&P sector performance and short, a clear pattern emerges:

Sectors that are up year-to-date show lower short interest % of float, reflecting a momentum strategy of buying and covering on the way up.

Conversely, sectors down for the year exhibit higher short selling sentiment data, consistent with a momentum strategy of selling or shorting on the way down.

The exception is the Communication Services sector (XLC), dominated by META, GOOG, and NFLX—three names with significant institutional long holdings data.

We’ve previously highlighted META’s short interest increase as the most significant among large-cap tech. META and NFLX show minimal change in percent short interest, while CHTR and LYV—both identified as squeeze stocks—have seen short interest rise by approximately 4%, increasing their short squeeze risk.

Short interest data across 5 key Communication sector names contributing to this increase reveals the following battleground dynamics:

TTD (The Trade Desk): Down 30% twice on earnings, short interest has more than tripled in 2023, with the stock down 60% YTD. Getting short with rising short interest ahead of earnings would have worked twice.

VZ (Verizon): Short interest rose 50% from 1.35%, still low given its market cap. The stock is up 9% YTD, mirroring broader indices. Not a squeeze stock—but an outlier where short interest increased alongside price appreciation.

OMC (Omnicom): Short interest doubled, likely driven by a corporate transaction where Omnicom acts as the parent entity—a move that may have triggered hedge fund positioning data shifts.

LYV (Live Nation): A known squeeze stock, short interest nearly doubled to 12%, while the stock is up 33% YTD (see earlier crowded shorts data analysis).

CHTR (Charter Communications): A chronically crowded short, with interest rising from 11.5% to 15%. A squeeze name with the stock is down 23% squeeze score expectations.

Takeaways

Communications (XLC) may cease to be an outlier if the shorts are correct and the sector trades lower.

Alternatively, investors could cover their shorts as the sector continues higher.

Want to know more? Access this data in real time using S3’s BLACK APP & BLACK MAP

The information herein (some of which has been obtained from third party sources without verification) is believed by S3 Partners, LLC (“S3 Partners”) to be reliable and accurate. Neither S3 Partners nor any of its affiliates makes any representation as to the accuracy or completeness of the information herein or accepts liability arising from its use. Prior to making any decisions based on the information herein, you should determine, without reliance upon S3 Partners, the economic risks, and merits, as well as the legal, tax, accounting, and investment consequences, of such decisions.