The FANG stocks are taking a big bite out of short sellers’ 2017 revenues with total short sale losses in the four companies totaling over $3.3 billion. Even with losses mounting throughout the year, short interest balances increased every month in 2017.
We are seeing an increase in short interest, which is being used as portfolio hedges and outright risk positions. With the S&P 500 up less than 7% and the NASDAQ up almost 13%, the 32% increase in FANG short interest has more to do with traders placing negative bets on a group of stocks that are up 26% for the year and doubling NASDAQ’s returns rather than delta hedging their portfolios.
It is not surprising that the FANG stocks are all in the top ten most shorted stocks in the U.S., or that the top ten most shorted stocks are easily beating year-to-date market returns and are up 21% for the year. What is surprising is that short sellers continue to build their positions as they rack up large mark to market losses month after month. All four FANG stocks are in the top fifteen most unprofitable shorts year-to-date, joining other notable shorts like Tesla Inc. (TSLA US), NVIDIA Corp. (NVDA US) and Caterpillar Inc. (CAT US).
With both short interest and losses growing every month, short sellers are realizing that FANG’s bite might be worse than their bark.
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Head of Research, S3 Partners
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