- Summary: 17% of General Motors shares were sold short at the beginning of 2006, up from 10% five months before, and any shorts who haven't covered are now sitting on 60% losses. GM has been the best performing Dow component stock, defying the shorts as cost-cutting and a tightened balance sheet have attracted new investors. Some hedge funds short GM bought GM bonds as a hedge, which lessened the blow, as the bonds are up about 15% in recent months. Short interest in GM is now down to 14%. Both bulls and bears recognize, however, that the runup in GM stock is not indicative of any fundamental improvement in GM's ability to build popular products in a high-priced fuel environment. Some new shorts came in following this week's earnings report, which acknowledged the company continues to lose market share.
- Comment on related stocks/ETFs: John Bethel has been an outspoken long on GM since April of 2005, claiming 'GM working out as an investment does not require substantial improvement in its North American car and truck business.' So far, he's right on. See another bullish take on GM from Glenn Curtis.
Source: GM Shorts Feeling the Pain