Our Black App and Blacklight SaaS Platform follow just over 12 thousand domestic equities with short interest of $765 billion. The average Short Interest % of Float is 6.83% and average stock borrow fee of 0.86%. We’ve seen the bearish tenor of short sellers wane over the last month with $7.4 billion of net short covering hitting the tape. And over the last week, with the markets sliding off recent highs, shorts have been relatively quiet with just $202 million worth of net short covering over the last week.
Even though there was a minimal amount of net short covering in the overall market last week, there were some shorted stocks that had increased bearish short selling activity and others that saw their bearishness reversed and shorted shares were actively covered. To measure the overall bearishness trend in a shorted stock we will look at short activity over the last month, both short selling and covering, and weighing recent short activity executed over the last week more heavily than short activity in the first three weeks of the month.
Dexcom Inc (DXCM) is our most bearish short based on our short activity weightings with shares shorted over the last week doubling its short selling over the first three weeks of the month. DXCM is down -2% today as Wells Fargo initiated coverage with an “equal-weight” rating. The stock is up over 83% for the year and the increased recent short selling activity indicates that the shorts think it is overbought.
Alibaba (BABA) was been one of the most active shorts, with almost $1 billion of new short sales over the last month, but short selling looks to be petering out over the last week as shorts seem to have hit their short exposure targets. BABA’s stock price has been trending downwards since mid-April when it hit its recent high of $212.66 . Shorts are up +$485 million in mark-to-market profits for the year, up +8.5%, +$344 million in profits since April 16th.
We saw a total flip of bearish sentiment in Bookings Holdings (BKNG) over the last month with $262 million of short covering in the first three weeks of the month which was almost totally reversed with $231 million of new short selling over the last week. BKNG’s share price had been slowly recovering since the last week of March after its stock price almost halved in the first ten weeks of the year, but we’ve seen price weakness since May 7th as the shorts began rebuilding their positions.
Starbucks (SBUX) recently reported that they will be re-opening 85% of their U.S. stores and short sellers have taken a seat at the counter with $126 million of new short sales over the last week. SBUX shorts are down -$1.3 million in 2020 mark-to-market losses, but up +$63 million in May. With SBUX share price weakening in May expect more short selling in the near future.
While new short selling in airline stocks American (AAL) and Delta (DAL) totaled $616 million for the first three weeks of the month, we saw a shorts take a breather and only short $66 million of stock over the last week. Shorts have been bearish in these two stocks for most of the year and continue to be bearish, especially after earning over $1 billion of 2020 mark-to-market profits in each name.
Stryker (SYK) shorts were covering some of their exposure after the stock was recouping some of its February\March losses but short sellers have been adding to their positions for most of May. With SYK’s stock price trending downward recently we should see the short selling trend continuing.
Shorted stocks with shares covered increasing are decidedly less bearish than when these shorts were originally executed. Overall, we saw $7.4 billion of net short covering amongst all the shares shorted in the U.S. market, but the stocks in the following chart are the least bearish of all the active shorts.
After hitting its year-to-date low on March 23rd, Abbvie INC (ABBV) has finally gotten back into 2020 positive territory this week. Short sellers have been cutting their exposure since the middle of April but have accelerated their short covering since the second week of May. ABBV shorts are down just -$36 million in 2020 mark-to-market losses but are down -$537 million in mark-to-market losses in May. We should expect more short covering as the short squeeze tightens its grip and mark-to-market losses mount.
Tesla (TSLA) shorts continue to cover in the face of large mark-to-market losses. Shorts are down -$166 million in mark-to-market losses in May but are down -$9.59 billion for the year. TSLA continues to be the Teflon short and is the largest short in the domestic market even with $2.2 billion of short covering over the last month.
Amazon.com (AMZN), Apple (AAPL) and Netflix (NFLX) short sellers were rushing for the exits during the first three weeks of the month with $6 billion of total short covering, but short covering screeched to a sudden halt over the last week and short sellers actually added $76 million of new short exposure in the three stocks. Until shorts start cutting their exposure in these three stocks in size we still see the short conviction in these stocks as overall bearish, but the sudden pause in short selling tells us things may go either way in the near future. AMZN and NFLX shorts are down big for the year, -$2.56 billion and -$1.83 billion of mark-to-market losses respectively, while AAPL shorts are only down -$358 million.
Microsoft (MSFT) short selling has come to a dramatic halt as short sellers have turned into short coverers over the last week. Shorts went from shorting $444 million over the first three weeks of the month to covering $362 million worth of stock over the last week. MSFT is only $8 off its year-to-date high and shorts are now down -$1.48 billion in 2020 year-to-date mark-to-market losses. Shorts were up +$931 million in mark-to-market profits on March 16th. Shares shorted are down -27% from year-to-date high of 64.2 million shares on March 30th, we can expect continued short covering as this recent rally continues.
Disney (DIS) short covering was accelerating with $107 million of short covering over the first three weeks of the month, but it was just a warmup for $189 million of short covering over the last week. DIS shorts are up $987 million in mark-to-market profits for the year, +37% for the year, so shorts may be thinking they have seen the last of the fireworks over Cindarella’s Castle with Shanghai Disney opening its doors and are beginning to exit their positions ahead of a rally. If shorts keep covering, look for DIS stock price to rebound.
Beyond Meat (BYND) short covering continues its steadily beat since mid-April as shares shorted hit year-to-date low of 7.19 million shares shorted. Shorts are down -$619 million in mark-to-market losses, -74% for the year. The fear of a nationwide meat shortage has pushed BYND’s stock price higher and shorts have been trimming their exposure accordingly.
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 as well as generate new trade ideas.
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Contact: Ihor.Dusaniwsky@S3Partners.com
Managing Director Predictive Analytics, S3 Partners, LLC
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