Short Sellers Profit as U.S. Stock Rally Pauses: Ortex Report
Short sellers rebounded in August amid a brief halt in the U.S. stock market surge. Ortex's latest analysis reveals insights into their profits and losses, with Johnson & Johnson and Nvidia in focus.
August witnessed a reversal of fortunes for short sellers, who had faced two consecutive months of losses. The pause in the steady climb of U.S. stocks provided the backdrop for this turnaround, as outlined in the latest analysis by data and analytics company Ortex.
During the past month, bearish investors collectively pocketed a substantial $14.8 billion in profits. This marked a significant recovery following their $16.5 billion loss in July and an astonishing $37 billion dip in June, according to the 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. The surge in U.S. Treasury yields exerted downward pressure on the shares of heavyweight growth stocks like Apple and Microsoft. These companies' future earnings become less attractive as interest rates rise.
Notably, the standout success story for short sellers in August was healthcare conglomerate Johnson & Johnson. Their short positions yielded approximately $1.3 billion in profits, as per Ortex's data.
This achievement coincided with Johnson & Johnson unveiling its first-ever outlook for its independent pharmaceutical and medical device divisions. This development came after the completion of the spinoff of its consumer health division, Kenvue, towards the end of the previous month.
However, the scenario was less favorable for short sellers dealing with shares of chip designer Nvidia. Despite reaching record-high stock levels after announcing a massive $25 billion buyback program and quarterly revenue forecasts that exceeded expectations, short sellers incurred losses amounting to $540 million. This marked the second consecutive month in which Nvidia took the top spot as the biggest losing bet, according to the Ortex report.
In the realm of electric vehicles, 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 raise the likelihood of a short squeeze.