Bears, a Short Sellers Best Friend

Top 50 Companies in the World-Short Sellers

Short Sellers by Company. First Thoughts and Clarification

Since my last post about the top 50 companies in the world by market cap and how much they’re owned by institutional investors seemed to interest folks, thought I’d follow up with something similar. This time, the data is about how much the market is betting against these companies. Essentially, it measures what short sellers are doing.

First things first, what is a “short seller?” According to Investopedia, short selling is “Short selling is an investment or trading strategy that speculates on the decline in a stock or other securities price.” So, if you’re wondering “how do short sellers make money?”, the answer is; by better on a decline in the value of a security (e.g. stock price goes down).

Some famous short sellers include George Soros, who shorted the Great British Pound in ’92, John Paulson, who shorted the housing market, and David Einhorn, who shorted Lehman Brothers.

Additional Clarification

About the list-this is not the exact same list as stock fluctuations have changed the rankings.

Also, what the percentages mean. They are what my TD Ameritrade brokerage calls “short interest”. Short interest is defined as “The number of shares of a security that have been sold short by investors. It is typically expressed as a percentage of the total number of shares outstanding and is reported on a monthly basis.”

The Short Sellers Data

The data is pretty interesting. #1 most bet against stock by short sellers is the Danaher Corporation (DHR) at 9.97%. #50 is Berkshire Hathaway class A shares (BRK.A) at a paltry 0.09%. This isn’t surprising as Warren Buffett has said he will never split Berkshire class A shares. This strategy has resulted in the stock being worth $352,475 a piece as of the time I’m writing this. Buffett’s stated intention was to attract “like minded investors” (i.e. drive away short sellers). It seems the Oracle of Omaha doesn’t like short sellers anymore than, well, any CEO.

The overall average is 1.828%. The US average is slightly higher at 1.934%, and the non-US average is noticeably lower at 1.05%. If the top 50 companies of the world are any indication, the market seems to take a more bearish view of US stocks, at least as far as the blue chips are concerned.

The Moment You’ve All Been Waiting For. Drumroll Please…Tesla Short Sellers!

No list about short selling the top 50 companies in the world would be complete with Tesla Short Sellers. Tesla (TSLA) is the second most shorted stock in the top 50 at 7.99%, noticeably lower than top stock Danaher, but noticeably higher than the averages calculated. Rounding out the top 5 are Broadcom (AVGO) at 6.82%, Qualcomm (QCOM) at 6.56%, and UnitedHealthCare (UNH) at 6.48%.

A lot of the news I’ve been reading has been about some of the most stubborn Tesla short sellers eating humble pie and admitting they were wrong, scurrying away from their short positions like rats abandoning the Titanic. This shouldn’t be too shocking considering the continuing astounding growth of the stock.

I first really paid attention to the short selling interest stat earlier this week because at that point the data was as recent as 12/15/2020. Contrary to the above news, at that time the short interest for Tesla was somewhere between 5-6%, I don’t recall exactly what it was. Since then the data has updated to be as recent 12/31/2020, so in the last two weeks of the year, more investors seem to be shorting Tesla. Basically, the market still seems, relatively speaking, bearish on Telsa.

So Not Only is the Short Position in Tesla Relatively Sizable, it’s Also Been Growing as of Late.

Also very interestingly, Michael Burry, portrayed by Christian Bale in The Big Short, and one of the most prominent Tesla Short Sellers, has stuck to his guns. That is, he’s remained steadfast in his belief it is due for a correction and holds a sizable short position in the company and has only increased it recently. Burry is no stranger to being criticized for his contrarian positions. He held onto his short position against the US housing market in the mid-2000’s when everyone else was calling him crazy and ended up making a killing when everyone else was tearing their hair out.

Other Interesting Data

I also chose to look at the info for Palantir (PLTR), Snowflake (SNOW), Airbnb, and Doordash since they were pretty prominent during a year of record IPOs (PLTR went public through a direct listing). Their short interest was 9.61%, 21.03%, 7.92%, and 3.99% respectively.

A few things stand out here. Most obviously is the enormously high short interest in Snowflake. 21.03% is much higher than any other stock here or in the top 50. A bit surprising considering the stock is up from ~$250 at IPO to ~$300 today.

Was also surprised by the amount of short interest in Palantir considering how much I, and the business world at large, respect Peter Thiel. My initial thought would be to not bet against him.

But I’m most surprised by the relatively mild interest in shorting DoorDash, which as I’ve previously explained, doesn’t seem like a great investment. Maybe the market knows something I don’t.

I any event, the link to the data is below. Am also thinking about doing this for other stats if people continue to find this interesting. Some ideas include volatility (I’ll show beta and historical volatility levels) and earnings-per-share (EPS) and price-to-earnings ratio (P/E). I’ll also take requests if the requisite data is available.

https://drive.google.com/file/d/1MfdgxjcTLuStZW4chTwCfEIP-as-hrmw/view?usp=sharing

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