Short sellers are getting bold again. And they've picked their favorite stock market targets to crash.
Eleven stocks in the S&P 1500, including retailer Big Lots, Cutera and Voya Financial, are facing the highest levels of short interest, says an Investor's Business Daily analysis of data from S&P Global Market Intelligence and MarketSmith. Short sellers, investors who profit when a stock falls, control 18.5% or more of all these stocks' shares outstanding.
Short sellers' role is drawing attention again following a more than 15% drop in shares of mobile payments processing company Block on a short-seller's critical report. The question is which stocks are next?
S&P 1500 Short Interest Ticks Up
Short interest is up slightly in March from the start of the year as bears spot opportunities. But where do they see crashes coming?
The average short interest on stocks in the S&P 1500 is 3.9%. That's up a bit from the 3.8% level coming into the year. But not surprisingly, many of the largest jumps in short interest are seen on individual stocks.
Take Big Lots, the Columbus, Ohio-based discount retailer. More than 31% of the company's shares outstanding are controlled by shorts. That's the highest short position in the S&P 1500. And the short interest is up from 28.7% coming into the year.
Remarkably, short interest remains high despite the stock already falling 30.1% this year. The company's bottom line is in serious trouble. Analysts think the company will lose another $4.02 a share this fiscal year, after losing nearly $6 a share last fiscal year. Meanwhile, revenue is expected to drop nearly 6%.
Other Big Short Bets In The Stock Market
You have to wonder if short sellers are just piling on too late in some cases.
Shares of Cutera, a maker of laser systems for aesthetic procedures, are already down nearly 40% this year to 26.63 each. Nonetheless, short sellers control more than 24% of the company's shares outstanding. Analysts think the company will lose another 52 cents a share in 2023, following a $3.05 a share loss in 2022. It's interesting, though, that the company is expected to return to profitability in 2024.
But short sellers aren't just kicking lagging stocks when they're down. They're also making big bets against asset manager Voya Financial and movie theater chain Cinemark Holdings, both of which are up strongly this year.
More than 23% of Voya's shares outstanding are controlled by shorts. Even so, shares are up 9% this year. The company's profit is expected to rise nearly 9% this year, too. And Cinemark shares are up even more, gaining 53% this year. That's a bit of a surprise for the short sellers sitting on more than 21% of the company's shares outstanding.
Shorts Picking Their Stock Market Spots Carefully
Of course, short interest is nowhere near where it was in 2021 during the GameStop rally.
In fact, now only 18.7% of GameStop's shares outstanding are being shorted. That's a fraction of where it was in 2021. In fact, many short sellers got shaken out of the market in February while the stock market gained.
"Average short interest in the S&P 500 was 2.25% in mid-February, down 11 basis points from mid-October 2022 when the S&P 500 hit a recent low," according to the latest S&P Global Market Intelligence data. "Short interest, which measures the percentage of outstanding shares held by short sellers, fell across all sectors from mid-October 2022 to mid-February, as the S&P 500 rallied about 16% over the same stretch."
But thanks to a slipping stock market and bank crisis, it looks like shorts are regaining some of their swagger.
Most Shorted Major Stocks
Highest short-interest to shares outstanding in S&P 1500
| Company Name | Ticker | Index | Short interest / shares outstanding | YTD % ch. | Sector |
|---|---|---|---|---|---|
| Big Lots | S&P 600 | 31.3 | -30.1% | Consumer Discretionary | |
| Cutera | S&P 600 | 24.4 | -39.8% | Health Care | |
| Voya Financial | S&P 400 | 24.0 | 9.0% | Financials | |
| Cinemark Holdings | S&P 600 | 21.5 | 53.2% | Communication Services | |
| PetMed Express | S&P 600 | 20.7 | -7.4% | Consumer Discretionary | |
| GEO Group | S&P 600 | 20.4 | -29.6% | Industrials | |
| Children's Place | S&P 600 | 20.3 | 2.7% | Consumer Discretionary | |
| Trupanion | S&P 600 | 19.5 | -20.0% | Financials | |
| Ebix | S&P 600 | 18.7 | -32.2% | Information Technology | |
| GameStop | S&P 400 | 18.7 | 24.9% | Consumer Discretionary | |
| Medical Properties | S&P 400 | 18.5 | -34.0% | Real Estate |
Sources: IBD, S&P Global Market Intelligence
Follow Matt Krantz on Twitter @mattkrantz
