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The Hard-Hitting Impact of Short Interest on Top Stocks The Hard-Hitting Impact of Short Interest on Top Stocks

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As equities hunker down for the tumultuous turmoil of 2024, a specific group of stocks bears the brunt of a punishing market. These are the stocks with the highest levels of short interest.

The Trend in Short Interest

In the large-cap Russell 1000, stocks have been sorted into deciles based on their short interest levels. Shockingly, the 100 stocks with the highest short interest percentages are already down by a staggering 8.76% year-to-date, in stark contrast to the mere 2.34% decline of the average stock in the index.

What’s more, this decline is significantly more pronounced than the second most heavily shorted decile, which has only averaged a decline of 2.81%. Conversely, the decile of least shorted stocks has seen an average increase of 0.41% so far this year.

Within the most heavily shorted decile, the landscape is littered with stocks that have plummeted by 20-30% since the start of the year. EV-related stocks such as Lucid (LCID), ChargePoint (CHPT), and Plug Power (PLUG) have already suffered significant losses. Similarly, solar stocks like Sunrun (RUN), cryptocurrency adjacent stocks like Coinbase (COIN), and meme stock mania names like AMC Entertainment (AMC) and GameStop (GME) find themselves in the same boat, with double-digit declines year to date.

Industry Short Interest Averages

The most recent short interest data, released just last week, reveals that the average stock in the Russell 1000 has 3.87% of its float shorted. Notably, short interest percentages for stocks in the Discretionary Retail and Autos sectors are close to or more than double this figure, standing at 9.1% and 7.6%, respectively. Additionally, Media & Entertainment, Transportation, and Consumer Services are the only other sectors averaging more than 5% of float shorted, while Insurance, Utilities, Banks, and Commercial and Professional Services are some of the least shorted industries.

The Impact on Highly Shorted Stocks

Some of the worst-performing stocks this year have been those with the highest levels of short interest. The table below displays the 30 Russell 1000 stocks currently with the highest short interest as a percentage of float.

Notably, recent IPO Maplebear, or Instacart (CART), tops the list with almost 29% short. However, it is important to mention some exceptions among these heavily shorted stocks. For instance, some of the recent IPO’d stocks such as CART, BIRK, and CAVA are actually up on the year. Celsius (CELH) has completely distanced itself from the pack, rising 11.4% year to dateβ€”outshining the rest by a considerable margin.

Original Post

Editor’s Note: The summary bullets for this article were chosen by Seeking Alpha editors.

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