Thanks Elon – short seller with first annual profit since 2018

NEW YORK, Dec 23 (Reuters) – The sharp drop in U.S. stock prices this year has been a boon for a group of investors, handing short sellers their first annual profit since 2018. And it’s not too tight : according to data from the analysis company S3 Partners, the most will be almost 304 billion dollars, about four times what it was in 2018. The return is 31%. The previous years, on the other hand, have been difficult for these traders who were betting on falling prices. They lost over $142 billion in 2021 alone, in part due to bets against meme stocks like GameStopGME.N, which then unexpectedly skyrocketed. The year before, it was the US Federal Reserve that made life difficult for short sellers with its rate cut in response to the coronavirus pandemic.

The short-selling situation has been “impossible” for years, complains portfolio manager Moez Kassam of Anson Funds. This year, on the other hand, “the wind blew the whole market in the face instead of giving it a tailwind”. In fact, the S&P 500 is expected to drop around 19% through the New Year, its biggest percentage loss since 2008. These are particularly tech-heavy companies such as TeslaTSLA.O, AmazonAMZN.O, MetaMETA .O and AppleAAPL.O which fill the pockets of “short sellers”. In addition, there is biotech company NovavaxNVAX.O – down around 90% – and electric car maker RivianRIVN.O, around 80% lower.

However, the largest absolute dollar gains came from short sellers of electric car pioneer Tesla, totaling $15 billion. The stock is down about 60% year over year. Stanphyl Capital portfolio manager Mark Spiegel has been betting against Elon Musk’s group since 2014 – “constantly, with different amounts”. Since then, the share has increased by a total of 1271 percent. This year, however, Tesla helped the fund return about 60%. Among other things, Musk’s heavy sales weighed on the stock. Some investors are also speculating that the Twitter acquisition may have distracted the billionaire.

AT LEAST, MORE “DANGEROUS ENTHUSIASM” EXPECTED

However, some traders expect the environment for short sellers to remain challenging. Economic data and Fed interest rate decisions led stocks to often move in lockstep. This makes it more difficult to choose individual stocks as targets for short selling. “It’s a very challenging environment because of the high correlation” of stocks, says Barclays’ Venu Krishna.

According to ValueWorks portfolio manager Charles Lemonides, the Fed’s new interest rate policy is expected to weigh on market sentiment next year. “We’re much less likely to see this dangerous investor enthusiasm for stocks like Tesla that has rattled short sellers,” he says. Lemonides wants to recognize good opportunities: “There are a bunch of companies that are highly leveraged, but are currently seen as invulnerable by equity investors.”

Thanks Elon – short seller with first annual profit since 2018

Source: Reuters

Cover photo: Image by ElasticComputeFarm on Pixabay

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