Using the Vanguard Total World Stock ETF (VT) as a proxy, worldwide markets rose by +2.10% over the last week. Short sellers are trimming their outstanding short positions as worldwide markets have rebounded almost +10% rise since they hit their recent lows around March 23rd.
With markets still down nearly -22% since February 21st, short sellers are looking to realize some of their mark-to-market gains. Shorts are up $357 billion, +29%, in aggregate mark-to-market profits since February 21st. Short sellers with major gains in stocks such as Tesla (TSLA US), Boeing (BA US), Luckin Coffee (LK US), AMS AG (AMS AV), Cineworld Group (CINE LN), ThyssenKrupp (TKA GR), IRB Brasil Ressegeros (IRBR3 BZ) or Anglo Platinum (AMS SJ) will be looking for exit points before their mark-to-market profits disappear into thin air.
We’ve seen almost $34 billion in net short covering over the last week, reducing worldwide short interest to $1.21 trillion, a decrease of -2.74%.
The following charts show the top five shorts and covers over the last week by region\country.
In the U.S., Visa’s quick and sharp rebound has triggered more short selling as it recovered over half of its post 2/19 losses and is up +21% off its recent lows. NFLX continues to be a defensive short but its recent valuation may look expensive, especially when considering the new competition in its market segment coming from the likes of Disney+. JPM recently cut its AAPL price target as it lowered iPhone sales projections, but the stock may be oversold as it trades at a 19x multiple, down from 23x not too long ago. MSFT has rebounded to 88% of its 2020 high and shorts are now covering shares to keep the market value of its short position constant (as a stock’s price rises the number of shares needed to keep a specific dollar hedge declines).
Short sellers adding to TELIA SS exposure as the company cuts its dividend amid COVID-19 revenue worries. RDSB LN short selling increases as the global oil glut cuts oil sector revenues worldwide. BNP FP shorts were big winners and are covering a large portion of their exposure ahead of anticipated EU banking intervention, BNP shorts are up +$1.1 billion, +54.5%, in mark-to-market profits in February\March\April. MC FP shorts are starting to take some of their profits off the table as well, they were up +7% in February and +2.5% in March\April.
Short selling in 7751 and 6594 continue as mark-to-market profits accumulate. 7751 and 6594 shorts are up +19% and +27% respectively since the beginning of February. The large declines in short interest are predominately due to post-record date trading, we expect short interest to continue to drop in these names over the next two weeks.
Banking and energy stocks dominate the top five increases and decreases in Canadian short selling\covering. Shorts are reallocating resources within market segments, adding to Toronto-Dominion short exposure while decreasing CIBC short exposure. Shorts selling is also increasing in Bank of Montreal and RBC and short covering is increasing in Bank of Nova Scotia. In the energy sector, shorts in CNQ and SU were big winners in Feb\March\April, up +63% and +60% respectively, and short sellers are increasing their bets as they see even lower stock prices in the short term. PPL shorts are up +84% over that same time period, but shorts are covering and looking to realize some of their mark-to-market profits as there might not be much left to make in the name.
After short interest in 2327 TT declined for the first three weeks in March, we are seeing new short selling over the last week in the Taiwanese electronic component maker as supply chain slowdowns due to retail weakness may negatively affect its near term sales. Short interest in 005930 KS climbed steadily through all of March, but we are seeing some position trimming in April even though shorts are up +22% in Feb\March\April. Shorts in 068270 KS are down -20% in Feb\March\April and we are beginning to see a short squeeze in this biotech giant, we should see continued short covering as Celltrion’s stock price continues to rally.
Australian banks hold four of the top five spots of the most shorted equities over the past week. While Australian banking shorts were up an average of +9.27% in mark-to-market profits in February, profits quadrupled to +37.28% in March\April. Shorts continue to build their positions into this price weakness. When banking sector stock prices stabilize and begin to rebound we should see a quick turnaround in short activity and the ensuing short covering helping push stock prices higher as shorts realize their profits. RIO AU shorts were up +15% in February, but just +8% in March\April. Shorts have been steadily covering since early March and are continuing the trend even though they are up +$207 million in mark-to-market profits since February. Another stock that has seen short covering since early March is ATM NZ, shorts in the milk producer are down -9% in mark-to-market losses since February.
Shorts were up +16% in ANG SJ in February, but gave back a third of their mark-to-market profits in March\April and are now increasing their short exposure in the gold miner. Both GRT AU and OMU SJ short sellers are up over +55% in February\March\April and shorts are pressing their bets and increasing their short exposure in anticipation of further stock price weakness. On the other side of the ledger, shorts in BID SJ and BVT SJ are covering even though shorts are up over +60% in February\March\April. Shorts are cutting exposure as these stocks hit target levels. Shorts are closing out some of their positions in BHP SJ as its price stabilizes in April. BHP shorts were up +28% in February and are down -1.1% in March\April and shorts are beginning exit their positions in search of greener pastures elsewhere.
Using our Black App an investor\trader can see a stock’s daily change in short selling and short sentiment, adding daily mark-to-market short Profit & Losses we provide another metric to the long buying and short selling decision process.
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Contact: Ihor.Dusaniwsky@S3Partners.com
Managing Director Predictive Analytics, S3 Partners, LLC
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