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Jun 13, 2017

S3 Research: June 5th – June 9th Best and Worst Short Performers

Every week, S3 tracks short sellers’ equity positions in the US, revealing the trades that delivered positive results or missed the mark.  After tracking $1,165 billion worth of short positions, the following is a list of this week’s top five best and worst performing shorts.

Top 5 Best Performing Shorts:
• AAPL: Falling 4% last Friday, Apple was this week’s best performing short, netting almost $400 million for short investors. Apple’s drop in share price was part of a world-wide sell-off of tech sector that drove the Nasdaq down by 2.4%. Apple is now the third largest short in the world behind Alibaba ADR and Tesla Inc. Despite this decline, Apple is still up 23% for the year.
• NFLX: After reaching an all-time high of $165.88 last Thursday, Netflix fell by 4.7% to $158.03 on Friday, the biggest drop out of the FANG stocks. Netflix’s drop compares with the 2.4% drop in the Nasdaq. One can expect more volatility in Netflix’s share price moving forward, as rivals such as Hulu Plus, HBO Now, and Amazon Prime Video have all been building its subscriber base. Netflix hopes that its recent streaming deal with Chinese Internet Browser Baidu will help build its international subscriber base.
• VMW: VMWare, an IT company that provides virtualization solutions for desktops and data centers, fell by 8% last week, earning it a spot on the week’s best performing shorts. Despite being up 13% on the year, short interest is still above $2 billion and up $4214 million, or 25%, for the year. VMW has taken a downward trend since the release of its 1Q earnings two weeks ago, which beat EPS and revenue estimates but did not meet expectations.
• SNAP: Snap Inc., the most shorted tech IPO this year, fell by a total of 14.2% last week following negative analyst reports, earning short investors $187 million. According to a Nomura Instinet analyst, Snap has been losing DAUs (daily active users) amid increasing competitive pressure from Twitter, Facebook, and Instagram. Snap analyst Anthony DiClemente reported that downloads of Snap have fallen by 22% in the last two months, and 44% on the Apple iOS platform. Snap short interest is $1.12 billion, down $262 million since the end of May.
• AMZN: After reaching an all-time high of $1,011.34 last week, Amazon’s stock fell by nearly $32, or 3%, on Friday during the tech sector sell-off that drove down the Nasdaq by 2.4%. AMZN’s short interest is up $971 million to $5.2 billion, or 23%, this year even though shorts re down $1.2 billion in year-to-date mark-to-market P/L.                 

Bottom 5 Worst Performing Shorts:
• TSLA: Tesla, the largest equity short in the U.S. market at $10.5 billion, increased 5% last week and was the worst performing U.S. short for the third week in a row. Tesla reached an all-time high of $370 last Thursday following Musk’s confirmation that the highly anticipated Model 3 sedan will begin production on schedule in July. In anticipation to the Model 3, Tesla is in the process of doubling its network of superchargers to 10,000 while also converting them to solar power. Its market cap has surpassed those of Ford and BMW, trailing only behind Toyota, Daimler Ag, and Volkswagen AG. Tesla short sellers are down $4.7 billion in mark-to-market year-to-date P/L.
• AMD: Advanced Micro Devices rose by 12.6% last week as it has been benefitting from the continuing popularity of cryptocurrencies like Bitcoin and Ethereum, which can be mined using the AMD’s powerful graphic cards. Its RX 500 series graphics cards have sold out at most online retailers since being launched in April due to the ever-increasing demand for cryptocurrency; Bitcoin is up 160% on the year. Furthermore, Apple recently announced that it will use AMD’s Vega graphics processors in its new iMac line, which is good news for AMD since Apple has traditionally used a different format of graphics software but is beginning the transition to dedicated graphics to boost its VR innovation efforts.  
• BLUE: Bluebird Bio Inc., a biotech company that specializes in gene therapy and this week’s worst performing short in terms of loss margin, rose 33% last week and finished at an all-time high of $111.90 on Friday after Janney Montgomery Scott adjusted its price target to $125 from $81. This was due to a recent update that its CAR T-Cell therapy, a type of cancer immunotherapy, which is performing favorably compared to other CAR-T programs in terms of safety and efficacy.
• YHOO: Yahoo hit an all-time high of $55.71 last Thursday after shareholders officially approved a deal for it to become part of Verizon, which will take place later this week. Yahoo! Short interest is up $1.4 billion, or 71%, to $3.3 billion this year. Shorts are down $854 million in MTM YTD P/L.
• NVDA: Nvidia reached an all-time high of $159.94 last Thursday, partly due to the continued frenzy for cryptocurrency, which can be mined using Nvidia’s graphic cards. However, the price fell again by more than $10 on Friday, as investors question whether this level of demand can be truly be sustained in the long-run. Nvidia is the 7th largest equity short in the U.S. market at $3.6 billion.

Want deeper insight into the above analysis? Contact: 
Head of Research, S3 Partners
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 decision.

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