Most U.S. stocks do not experience all-out long versus short trading battles since long shareholders outweigh short sellers by forty-three to one ($64 trillion versus $1.5 trillion). Although most stocks have relatively insignificant short selling relative to their long holdings there are stocks where short sellers do have an impact on price moves.

One of the most important factors to consider is that daily price moves are determined by imbalances of buying or selling pressure in a particular stock. Overloading the Bid or Offer side of the market will either force stock prices up or down. Not all $64 trillion long shareholders actively trade their shares, in fact the vast majority of long shareholders are passive investors who buy shares and hold onto them for long periods of time. These shareholders include mutual funds, index funds, ETF providers, pension funds and most retail investors.

Active investors do trade regularly, getting into new stocks, closing existing stock positions or managing their stock exposure by trimming or adding shares on a daily basis. Active investors, such as hedge funds, are also the primary short sellers in the market.

Therefore, in order to truly see which stocks are long versus short battleground stocks or which are skewed heavily to the long or short side in actively traded portfolios we need to identify the amount of stock held long by passive versus active investors. Using S3’s MAP and Disclosure products we see that total disclosed long holdings are $54.7 trillion (not all long holdings are disclosed) which is split between $41.5 trillion of passive shareholders and $13.2 trillion of active shareholders. Three quarters of all U.S. shares are held by passive investors while only one quarter are held in actively traded portfolios.

Using S3’s Black App we also see that total U.S. regulatory reported short interest is $1.55 trillion, which is primarily held in actively traded portfolios. Active long holdings outnumber active short holdings by 8.5 to 1, meaning that most stocks are heavily skewed to the long side. But there are battles to be fought much like the Spartans versus Persians at Thermopylae, British versus French at Waterloo and the Union versus Confederacy at Gettysburg.

We can break the U.S. market into two groups, mega and large cap stocks which are traded by the larger more multi-strat hedge funds and the mid and small cap stocks which are mainly traded by the “smaller” hedge funds.

The most “skewed long” mega & large stocks in “active” portfolios are predominantly the Mag 7 and sector leaders, led by MSFT, NVDA and AAPL.

There are not many mega and large cap stocks which skew to the short side, with only five stocks with over a $100 million short bias:

There are also not many “battleground” stocks in the mega and large cap arena because so many of these stocks skew long as they are primary holdings to generate market beta in portfolios. But there are several stocks where both long shareholders and short sellers are going toe-to-toe.

Mid and small cap stocks are where long shareholders and short sellers battle on a much fairer playing field as many of the largest hedge funds do not traffic in these names. These are the names that become long versus short rivalries, much like Bears – Packers, Yankees – Red Sox, Bruins – Canadiens or FC Barcelona – Real Madrid.

Mid and small cap stocks that skew to the long side where there may be significant short selling, but the long buying overwhelms the short side:

There are more mid and small cap stocks that skew to the short side than we see in the mega and large cap stocks as active long shareholders have a larger pool of stocks to pick from and tend to be less active in the more shorted names:

And there are many more “battleground” stocks to pick from in the mid and small cap space. Many mid and small cap stocks are championed by long shareholders in one hedge fund versus a short seller in another. We see sizable wagers on both sides and changes in long or short exposure can have a significant impact on daily price moves. A sample of the mid and small cap “battleground” stocks are:

Using S3 long data from our MAP and regulatory Disclosure products gives insight into the long side of the market by quantifying passive and active holdings on the street. The S3 Black App and short side data product quantifies the “other” side of the portfolio, short selling activity.

Using both products identifies which securities have outsized passive long shareholding and therefore have less market volatility versus stocks that have larger amount of active long and\or active short shareholders. The more actively held stocks have a higher probability of greater volatility and possibly even more importantly, higher Gamma – a higher rate of change of the rate of change.

Identify stock characteristics and minimize risk by using the S3 long side MAP and Disclosure products in tandem with the S3 short side Black App.

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

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.