Short sellers - investors who bet on declines in a company’s share price - are sitting on $303.7 billion in realized and unrealized gains, a fourfold increase compared with 2018, their last profitable year, data from analytics firm S3 Partners showed. That works out to a 31.2% return on total average short interest of $973.6 billion throughout the year, according to S3 Partners.
This year “was easier for shorting because the economic environment felt like a headwind to the whole market, instead of the tailwind seen in previous years,” said Moez Kassam, portfolio manager at long-short hedge fund firm Anson Funds, which oversees around $1.7 billion and posted a 4.9% gain through November. “Shorts have been impossible for years,” he said.
While higher interest rates have punished growth stocks, some investors believe Tesla CEO Elon Musk’s purchase of Twitter is diverting his time running the electric car company. Musk’s Tesla share sales have also weighed on the stock, and investors have been watching for signs that consumer demand for electric vehicles is cooling.
Not all short strategies worked this year. Long-short hedge funds, which bet on stock prices rising or falling, posted a 9.7% loss through November, according to data provider HFR. At the same time, energy stocks such as Exxon Mobil Corp , Occidental Petroleum Corp, Chevron Corp and Marathon Petroleum notched big gains following a surge in energy prices, bruising those who bet against them.