Retail sector short interest declined by a third in the first quarter of 2020 as the stock market plunged in response to the Covid pandemic, but has more than doubled since then, topping $90 billion in November.
Total short interest in the Retailing Sector is $91.05 billion and we have seen +$1.16 billion of additional short selling over the last thirty days, an increase of +1.3%. The most shorted stocks in the sector are dominated by Internet Retailing stocks, making up seven out of the top ten. Alibaba Group (BABA) and Amazon.com (AMZN) are the largest shorts in the Retailing sector by a wide margin with short interest in both stocks more than twice as large as Carvana (CVNA) in third place.
The following are the top ten most shorted stocks in each sub-industry with at least $10 million of total short interest.
Selling stocks in the Retailing sector short was not usually a winning trade in 2020, only 40% of the Retail sector securities sold short were profitable and 60% were losers. But more importantly, winning securities were only up an average of +$24 million in year-to-date net-of-financing mark-to-market profits while losers were down an average of -$181 million per security. It was difficult to pick a winner in the Retailing sector, and the payoff was almost eight times smaller than a winning bet in the sector. Profitable trades in the sector generated +$3.2 billion in profits while un-profitable trades generated -$35.9 billion in red numbers.
The top worldwide most profitable Retail sector shorts in 2020 are:
The top worldwide least profitable Retail sector shorts in 2020 are:
November was an especially difficult month for Retail sector short sellers, who incurred -$10.2 billion in mark-to-market net-of-financing losses or nearly a third of their -$32.7 billion of year-to-date losses. Alibaba Group ADR (BABA) was the only stock that had over $100 million on November mark-to-market profits.
Pinduoduo ADR (PDD) and Carvana (CVNA) short sellers generated over -$1 billion of month-to-date losses in November and made up 27% of the total losses in the sector. The worst performing Retailing shorts for the month of November are:
There are several stocks in the Retailing sector that are crowded and incurring large mark-to-market losses – prime candidates for short squeezes.
Alibaba (BABA) and Amazon.com (AMZN) with over $10 billion of short interest each and over -$7.5 billion of mark-to-market losses between them seem to be the definition of a short squeeze candidate but their large floats and their use as regional and sector hedges make them less susceptible to short squeezes.
There are several strong short squeeze candidates in the sector, stocks with large short interest % of float (the S3 SI% Float is more accurate as it includes “synthetic longs” created by short selling) and recent mark-to-market losses.
Stocks which are short squeeze candidates in the sector are:
With retail stocks seeing a strong upsurge in stock prices as the potential for successful Covid vaccines may end or minimize lockdowns in early 2021 we should see the surge in short selling wane and short covering become more widespread in some sub-industries.
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.
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.