Tuesday, February 27, 2024

Investors lost $195 billion shorting stocks in 2023. Here were the 10 most painful bets.

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Stock traders

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  • Stocks soared in 2023, crushing short sellers betting equities would tumble.

  • Short sellers saw $195 billion in paper losses last year, according to data firm S3 Partners.

  • Tesla, Nvidia, and Apple led the way as the most painful short bets.

There was no shortage of bearish forecasts and recession outlooks coming out of Wall Street at the start of last year.

With the exception of Fundstrat’s bullish strategist Tom Lee, just about everyone was wrong. Stocks soared, the economy proved resilient, and analysts have either pushed back or reversed their forecasts for a downturn.

Over the last 12 months, the S&P 500, Nasdaq, and Russell 3000 indexes gained 24%, 43%, and 24%, respectively.

The stunning strength of the market and the economy left US and Canadian short sellers with $194.9 billion in paper losses, according to research firm S3 Partners. Shorting a stock is when an investor bets the price will fall.

Tesla, for one, was the most painful short bet, resulting in $12.2 billion of paper losses for traders in 2023. Nvidia shorts saw $11.2 billion in paper losses, and Apple came in third place with $7.3 billion in losses.

“This year’s mark-to-market losses offset two-thirds of last year’s $299.1 billion of short-side mark-to-market profits,” S3 said in a report published Wednesday. The worst-performing sectors on the short-side included Information Technology (down $75.7 billion) and Consumer Discretionary (down $46.9 billion).

“[O]nly the Utilities sector had a positive return on the short side (+$1.0 billion +4.72%),” S3 said.

These were the 10 most painful trades for short sellers in 2023:

  1. Tesla: -$12.2 billion

  2. Nvidia: -$11.2 billion

  3. Apple: -$7.3 billion

  4. Meta Platforms: -$6.6 billion

  5. Microsoft: -$5.6 billion

  6. Amazon: -$4.9 billion

  7. Coinbase Global: -$4.1 billion

  8. Broadcom: -$3.3 billion

  9. Advanced Micro Devices: -$3.2 billion

  10. Palo Alto Networks: -$3.0 billion

Short sellers did see some success though, with profitable bets led by names caught up in the banking collapse in March as well as vaccine makers, which saw their stocks slide in 2023. Here were the most profitable short trades of 2023:

  1. First Republic Bank: $1.6 billion

  2. Moderna: $1.2 billion

  3. SVB Financial Group: $1.1 billion

  4. Pfizer: $990 million

  5. Plug Power: $871 million

  6. Enphase: $837 million

  7. SolarEdge Technologies: $797 million

  8. Medical Properties Trust: $773 million

  9. Exxon Mobil: $715 million

  10. Johnson & Johnson: $667 million

Read the original article on Business Insider

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