U.S. Short-Side 6 Month Recap
Author:
Ihor Dusaniwsky
Managing Director of Predictive Analytics, S3 Partners
Matthew Unterman
Director of Predictive Analytics, S3 Partners
U.S. equity short interest increased gradually from January to April 2023 but had appreciable upward sloping growth in May and June of 2023. Overall, U.S. equity short interest climbed from $864 billion at the end of 2022 to topping the trillion-dollar level at $1.001 trillion by the end of June 2023. This $138 billion increase was made up of $28 billion of increased short selling coupled with a $110 billion mark-to-market increase in the value of shares shorted.
While short sellers were actively shorting into a rising market, that does not necessarily mean that they were solely betting on a reversal in an overheated or overbought market. A significant portion of the short selling was due to an increase in hedge fund leverage as they increased both their long and short exposure. Hedge funds increased the total notional size of their portfolios to gain more exposure to the volatile and upward trending market.
Sector Short Int ($mm's)
12/30/22 Short Interest
6/30/23 Short Interest
6 Month Short Int. Change
Change Shares Shorted
Communication Services
$57,367
$68,763
$11,396
$777
Consumer Discretionary
$128,980
$169,457
$40,476
$8,316
Consumer Staples
$44,369
$44,704
$335
($149)
Energy
$68,309
$65,294
($3,014)
($943)
Financials
$119,886
$127,415
$7,529
$5,630
Health Care
$115,180
$119,934
$4,754
$5,866
Industrials
$97,821
$114,222
$16,401
$3,269
Information Technology
$138,551
$192,593
$54,042
$749
Materials
$36,824
$38,724
$1,900
$165
Misc. (SPACs)
$269
$64
($205)
($120)
Real Estate
$33,686
$39,259
$5,574
$5,030
Utilities
$22,618
$21,040
($1,578)
($686)
Total Sectors
$863,859
$1,001,470
$137,611
$27,903
Tech stocks dominated the largest short positions in the market, taking nine out of the top ten spots in the league table. Tesla Inc (TSLA) recently retook the top spot on the leaderboard after relinquishing the throne to Apple Inc (AAPL) in early March.
U.S. SI % Float increased from 4.66% to 4.99% in the first six months of 2023, telling us that in addition to more short selling over the last six months, that short selling occurred in smaller cap stocks. We have seen $4 billion of increased short selling in Small Cap stocks in just the last thirty days.
U.S. Short Interest
Ticker
SI % Float
S3 SI % Float
Short Interest
TESLA INC
TSLA
3.47%
3.36%
$25,038
APPLE INC
AAPL
0.76%
0.75%
$23,115
MICROSOFT CORP
MSFT
0.61%
0.60%
$15,107
NVIDIA CORP
NVDA
1.14%
1.12%
$11,404
AMAZON.COM INC
AMZN
0.90%
0.89%
$10,541
META PLATFORMS INC
META
1.34%
1.32%
$8,450
VISA INC
V
1.86%
1.83%
$7,131
ALPHABET INC A
GOOGL
0.90%
0.89%
$6,346
ALIBABA GROUP ADR
BABA
2.37%
2.31%
$5,202
PALO ALTO NETWORKS INC
PANW
6.71%
6.29%
$5,160
BROADCOM INC
AVGO
1.38%
1.37%
$4,845
ADVANCED MICRO DEVICES
AMD
2.48%
2.42%
$4,514
NETFLIX INC
NFLX
2.28%
2.23%
$4,395
TMOBILE US INC
TMUS
5.71%
5.41%
$3,977
ALPHABET INC - C
GOOG
0.62%
0.62%
$3,838
EXXON MOBIL CORP
XOM
0.85%
0.84%
$3,677
IBM CORP
IBM
2.88%
2.80%
$3,501
CANADIAN NATURAL RESOURCES LTD
CNQ
5.70%
5.40%
$3,456
AIRBNB INC
ABNB
6.82%
6.39%
$3,367
CHARTER COMMUNICATIONS
CHTR
9.08%
8.32%
$3,151
HOME DEPOT INC
HD
1.00%
0.99%
$3,124
TEXAS INSTRUMENTS
TXN
1.88%
1.85%
$3,075
CISCO SYSTEMS
CSCO
1.41%
1.39%
$2,964
CHEVRON CORP
CVX
0.99%
0.98%
$2,954
ELI LILLY & CO
LLY
0.70%
0.70%
$2,795
Total U.S. Short Interest
4.99%
4.46%
$1,001,470
The Information Technology and Consumer Discretionary sectors saw the largest increase in short exposure. But interestingly, there was minimal short selling, just $0.8 billion in the Information Technology sector relative to the $53 billion mark-to-market increase in the value of their existing short positions. Short sellers were not actively increasing their exposure or backing up their bets with more short selling as their short exposure increased with mark-to-market appreciation.
But in the Consumer Discretionary sector we saw active exposure building with $8.3 billion of new short selling even as short exposure increased by $32.2 billion in mark-to-market appreciation of existing short positions. Short sellers were pushing more chips into the Consumer Discretionary pot, anticipating short side outperformance in the sector, and increasing their positions accordingly.
There were two sectors with sizable short covering, the Energy and Utilities sectors saw $3.0 billion and $1.6 billion of short covering, respectively. These were the only two profitable sectors on the short side over the last six months with short sellers up over +3% in mark-to-market returns. Short sellers were actively decreasing their exposure in these two profitable sectors, possibly signifying a future oil price movement could buoy stock prices in these sectors.
U.S. short sellers are down -13.09% in year-to-date mark-to-market losses with the information Technology and Consumer Discretionary sectors the worst performing and the Energy and Utility sectors to best performing.
Sector Short Int ($mm's)
6/30/23 Short Int
6 Month MTM P\L
MTM P\L %
Communication Services
$68,763
($12,211)
-19.36%
Consumer Discretionary
$169,457
($34,729)
-23.27%
Consumer Staples
$44,704
($662)
-1.49%
Energy
$65,294
$2,554
3.82%
Financials
$127,415
($1,289)
-1.04%
Health Care
$119,934
($3,512)
-2.99%
Industrials
$114,222
($15,381)
-14.51%
Information Technology
$192,593
($54,357)
-32.83%
Materials
$38,724
($1,997)
-5.29%
Misc. (SPACs)
$64
($2)
-1.17%
Real Estate
$39,259
($1,221)
-3.35%
Utilities
$21,040
$696
3.19%
Total Sectors
$1,001,470
($122,110)
-13.09%
The most profitable short trades in 2023 are dominated by banking and health care stocks:
Most Profitable 2023 Short Trades
Ticker
Avg Short Interest
YTD MTM P\L
P\L %
FIRST REPUBLIC BANK/CA
FRCB
$386,457,322
$1,619,940,040
419.18%
SVB FINANCIAL GROUP
SIVBQ
$438,600,548
$1,061,071,050
241.92%
MODERNA INC
MRNA
$2,431,285,370
$920,686,591
37.87%
SIGNATURE BANK NY
SBNY
$209,001,612
$642,728,839
307.52%
ENPHASE ENERGY
ENPH
$1,216,380,985
$595,257,237
48.94%
PFIZER INC
PFE
$1,837,431,209
$584,095,188
31.79%
ETSY INC
ETSY
$1,506,626,104
$507,122,188
33.66%
PINDUODUO INC ADR
PDD
$2,287,515,430
$457,511,471
20.00%
LUMEN TECHNOLOGIES INC
LUMN
$444,752,171
$430,944,837
96.90%
ENBRIDGE INC
ENB
$2,255,044,239
$396,259,560
17.57%
CVS HEALTH CORP
CVS
$1,259,045,474
$375,783,722
29.85%
FIRST HORIZON NATL
FHN
$493,913,836
$372,439,093
75.41%
DOLLAR GENERAL CORP
DG
$913,187,023
$352,584,753
38.61%
ABBVIE INC
ABBV
$1,953,899,017
$339,710,083
17.39%
CHARLES SCHWAB CORP
SCHW
$1,267,698,866
$334,487,867
26.39%
SILVERGATE CAPITAL CORP
SICP
$115,873,854
$317,693,858
274.17%
AMGEN INC
AMGN
$1,864,065,157
$313,177,105
16.80%
BANK OF AMERICA
BAC
$2,186,391,277
$309,920,513
14.17%
CHEVRON CORP
CVX
$2,522,224,281
$309,778,008
12.28%
JD.COM INC ADR
JD
$742,683,132
$306,551,310
41.28%
TRUPANION INC
TRUP
$369,511,947
$297,898,661
80.62%
UNITEDHEALTH GRP
UNH
$2,515,923,372
$289,709,655
11.52%
DISH NETWORK CORP
DISH
$396,932,929
$286,130,227
72.09%
NOVOCURE LTD
NVCR
$575,544,753
$272,344,050
47.32%
TEXAS PACIFIC LAND CORP
TPL
$453,843,700
$270,129,067
59.52%
While tech and travel stocks headlined the least profitable short trades in 2023:
Least Profitable 2023 Short Trades
Ticker
Avg Short Interest
YTD MTM P\L
P\L %
TESLA INC
TSLA
$16,686,820,170
($13,008,708,644)
-77.96%
NVIDIA CORP
NVDA
$8,952,577,465
($9,087,963,502)
-101.51%
APPLE INC
AAPL
$18,509,625,991
($7,480,743,267)
-40.42%
META PLATFORMS INC
META
$5,834,754,689
($4,531,422,101)
-77.66%
MICROSOFT CORP
MSFT
$11,445,959,448
($4,049,939,102)
-35.38%
AMAZON.COM INC
AMZN
$7,092,075,867
($3,232,841,604)
-45.58%
PALO ALTO NETWORKS INC
PANW
$3,679,423,789
($2,320,953,520)
-63.08%
BROADCOM INC
AVGO
$3,762,374,458
($1,957,952,308)
-52.04%
ADVANCED MICRO DEVICES
AMD
$3,113,299,706
($1,571,936,444)
-50.49%
COINBASE GLOBAL INC
COIN
$2,199,617,864
($1,537,560,179)
-69.90%
ALPHABET INC - A
GOOGL
$4,871,371,366
($1,430,802,464)
-29.37%
NETFLIX INC
NFLX
$3,147,913,718
($1,413,835,259)
-44.91%
CARNIVAL CORP
CCL
$1,391,327,131
($1,338,566,579)
-96.21%
PALANTIR TECHNOLOGIES INC
PLTR
$1,303,346,649
($1,251,287,848)
-96.01%
CARVANA CO
CVNA
$538,176,941
($1,102,102,072)
-204.78%
SHOPIFY INC
SHOP
$1,933,644,199
($1,094,753,612)
-56.62%
ALPHABET INC - C
GOOG
$3,412,940,067
($1,085,156,034)
-31.80%
ROYAL CARIBBEAN CRUISES
RCL
$1,398,534,995
($1,077,257,865)
-77.03%
AIRBNB INC
ABNB
$2,387,311,525
($1,014,952,896)
-42.51%
VISA INC
V
$7,174,121,977
($892,414,355)
-12.44%
ADOBE SYSTEMS INC
ADBE
$2,040,901,432
($860,832,712)
-42.18%
SUPER MICRO COMPUTER INC
SMCI
$653,363,423
($857,326,957)
-131.22%
WAYFAIR INC
W
$1,074,457,584
($817,764,311)
-76.11%
MONGODB INC
MDB
$973,349,276
($802,612,302)
-82.46%
SALESFORCE INC
CRM
$1,856,649,139
($775,919,522)
-41.79%
We have seen steady increased U.S. short selling since May and expect this trend to continue as hedge fund leverage continues to increase. The short side may be turning into a more stock pickers market as the crowded large cap tech names on the short-side have produced outsized mark-to-market losses and hedge funds may be looking for less crowded names to boost returns after they were under-invested in tech on the long-side for most of the year. Mid-cap and small-cap shorts such as Ralph Loren Corp (RL), Arbor Realty Trust Inc (ARBR), Fisker Inc (FSR), CareTrust REIT Inc (CTRE) and Wayfair Inc (W) are seeing short-side inflows while mega-cap and large-cap names such as Taiwan Semiconductor Inc (TSM), Alphabet Inc (GOOG), Enbridge Inc (ENB) and United Health Group (UNH) see continued outflows.
Looking at short selling trends over time provides insight into overall market sentiment as well as the strength of bearish conviction in individual equities. Our Blacklight SaaS platform and Black APP provides an up-to-date view of short selling and short covering on an equity, sector, index, or country-wide basis allowing investors\traders to better manage their existing long and short positions.
Our Blacklight SaaS platform and Black App provides an up-to-date view of short selling and short covering on an equity, sector, index, or country-wide basis allowing investors\traders to better manage their existing long and short positions.
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