Short selling in U.S. equities has rarely been as punishing as it has been in 2025. S3 Partners data shows that the “Most Shorted” basket outperformed the average U.S. equity by 0.28% per day over the past six months, one of the strongest runs of relative gains on record. For comparison, the last time shorts were squeezed this consistently was January 26, 2021, after meme-stock rallies drove 5% outperformance for the most shorted stocks in a single day.

Cumulative Returns Across Factors:

Most Shorted Basket (+48% YTD): Aside from underperformance during the tariff-driven selloff in late February–early April and a brief dip in late July, the most shorted stocks have outperformed for most of the year.

Battleground Stocks (LTS 0.65–1.35, +64% YTD): A factor defined by roughly equivalent short interest and active long interest as tracked by S3. 2025 saw a sustained rebound, with returns well above the market but at higher volatility.

Short-Biased Stocks (LTS <0.65, +95% YTD): A focused short factor defined by short interest significantly exceeding active long interest as tracked by S3.

Average U.S. Equity (+15% YTD): The average U.S. equity delivered modest returns — highlighting how positioning and squeezes defined the year for shorts.

The Battleground basket — defined by S3’s Long-to-Short ratio (0.65–1.35), where active long interest and short interest are roughly balanced — has gained +64% YTD. These are the names where active managers are effectively fighting toe-to-toe, with long buyers and short sellers holding comparable dollar positions. Some stocks in this cohort where the battle has raged in 2025 include Hims & Hers Health (HIMS), Tempus AI (TEM), C3.ai (AI), Bloom Energy (BE) and IonQ (IONQ).

Short-Biased stocks — where short interest far outweighs active longs (LTS < 0.65) — are up +95% YTD, after capping single-day moves at 5x for this report. That cap applied to QMMM, which jumped 17x on September 9. On the same day, EPSM rose 4x. Even excluding those extremes, the group still averaged +3% that day, versus +0.1% for the average stock. The Short-Biased cohort has grown from an average 28 stocks in 2020 to 47 in 2025, while the Battleground group has expanded from roughly 51 names to 90 over the same period. This reflects the growing share of equities where positioning is contested, heightening the risk of crowding squeezes and sharp volatility when one side capitulates.

The relative returns series shows just how one-sided 2025 has been. Through September 19, the most shorted stocks outperformed the market on 55% of trading days, meaning shorts lost ground more often than they gained it. That may not sound extreme in isolation but compared to prior years it stands out: from 2021 to 2024, the “Most Shorted” basket only beat the market on 48% of days. The last year with more than half of days showing outperformance was 2020, at 54%.

The defining feature of 2025 has been the consistency of outperformance, demonstrating how crowding and positioning can overwhelm fundamentals in a frothy market. As in the squeeze periods of 2020 and 2021, this year’s gains have been relentless. The takeaway is clear: monitoring crowding, LTS ratios, and squeeze risk is essential. Talk to S3 to dig deeper into the data and sharpen your edge.

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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.

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