August saw a reversal of fortune for short sellers, who had faced two consecutive months of losses. The pause in the steady rise of US stocks provided the backdrop for this change, as outlined in the latest analysis from data and analytics company Ortex.
Over the past month, bearish investors collectively pocketed a substantial $14.8 billion in profits. This marked a significant recovery after its $16.5 billion loss in July and a staggering $37 billion drop in June, according to insights provided by Ortex.
The respite in the stock market rally was evident in the S&P 500 index, which halted its five-month winning streak. Rising US Treasury yields put downward pressure on big growth stocks like Apple and Microsoft. The future earnings of these companies become less attractive as interest rates rise.
In particular, the most notable success story for short sellers in August was that of healthcare conglomerate Johnson & Johnson. His short positions generated approximately $1.3 billion in profits, according to Ortex data.
This achievement coincided with Johnson & Johnson’s presentation of its first outlook for its independent pharmaceutical and medical device divisions. This development came after the completion of the spin-off of its consumer health division, Kenvue, late last month.
However, the scenario was less favorable for short sellers trading shares of chip designer Nvidia. Despite hitting record stock levels after announcing a massive $25 billion buyback program and quarterly revenue forecasts that beat expectations, short sellers incurred $540 million in losses. This was the second month in a row that Nvidia ranked first as the biggest losing bet, according to the Ortex report.
In the electric vehicle space, Lion Electric currently holds the highest “Ortex short score.” This score indicates that the stock is subject to significant short interest and exhibits other characteristics that increase the probability of a short squeeze.
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