Investors and traders who shorted the biggest technology stocks this year reaped almost $50 billion in gains. Moreover, many traders believe shorting the mega-cap tech stocks next year will generate profits as valuations on many mega-cap stocks remain high. Even after this year’s -27% slump in the Nasdaq 100 ($IUXX) (QQQ), many of the technology stocks within the index are still expensive relative to their forecasted sales and earnings.
According to data-analytics company S3 Partners, the ten most-shorted stocks in the Nasdaq 100 delivered $49.2 billion in combined mark-to-market gains through last Friday. Tesla (TSLA) leads with almost $12 billion in paper profits for short sellers, followed by Amazon.com (AMZN) and Meta Platforms (META). Other top 10 companies for short-sellers include Apple (AAPL) and Microsoft (MSFT).
Short sellers borrow shares and sell those shares, hoping to repurchase them at a lower price to profit from the difference.
Short sellers struggled to make any profits during the years-long bull market when high valuations didn’t seem to matter. However, that changed this year when surging inflation prompted aggressive rate hikes from the Federal Reserve, sparking an exodus from high-valued tech stocks.
The manager of AdviserShares Ranger Equity Bear ETF said shorting technology stocks into next year can also be profitable. He said, “there are still a ridiculous amount of companies out there that are trading at 10, 15, 20 times price to sales,” and that such multiples are “absurd.” He added that “the odds of those multiples being profitable over time for an investor is so low that they are a great pool to fish from.”
According to data from Vanda Research, investment portfolios belonging to retail traders suffered $350 billion in losses this year. Many of the most-shorted stocks were also among the most-owned stocks by individual investors. The list is topped by Tesla, which accounts for about 10% of the average self-directed global retail trader’s portfolio. Miller Tabak & Co. said, “it’s likely investors will make money shorting tech again in 2023 as history tells us that bear markets for the tech group do not end until the biggest names become at least somewhat cheap.”
More Stock Market News from Barchart
- Stocks Soar on Fed-Friendly U.S. CPI Report
- Berkshire Hathaway Remains an Excellent Long-Term Buy for Cost-Conscious Investors
- Domino's Pizza Stock Is Still a Bargain With Good Option Income Plays
- Markets Today: Stock Indexes Surge After U.S. Consumer Prices Subside
On the date of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes.
/AI%20(artificial%20intelligence)/Data%20Center%20by%20Caureem%20via%20Shutterstock%20(2).jpg)
/PayPal%20Holdings%20Inc%20HQ%20photo-by%20bennymarty%20via%20iStock.jpg)
/Micron%20Technology%20Inc_%20logo%20on%20building-by%20vzphotos%20vis%20iStock.jpg)
