Performance by Short Interest Decile: Not What You'd Expect

Below we have updated our lists of the most and least heavily shorted stocks based on the most recent short interest data. As shown below, NTRI is the Russell 1,000 stock with the highest short interest as a percentage of float. Currently, 78.2% of NTRI's equity float is sold short. NTRI is followed by IMB, MBI, VMW, SHLD and WBMD.

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The list below highlights Russell 1,000 stocks with the lowest short interest as a percentage of float. A brief look at the year to date performance of this list shows that these are down more in 2008 than the stocks with the highest short interest.

We separated the Russell 1,000 into deciles (10 deciles of 100 stocks) based on short interest and calculated the average year to date percent change of the stocks in each decile. Currently, the decile of the most highly shorted stocks is down the least on the year, while the deciles of stocks with the lowest short interest are down the most.

This is interesting given the fact that markets are down so much in 2008. One would think that short investors would be doing well in this type of market, but the numbers below indicate otherwise. Could this be due to buy-side firms being forced to liquidate positions, thus pushing highly shorted stocks higher because the positions have to be bought.

Comments

[jcrash:]

"This is interesting given the fact that markets are down so much in 2008. One would think that short investors would be doing well in this type of market, but the numbers below indicate otherwise."

How so? Shorts are UP, regardless of decile. Longs are down regardless of decile.

"Could this be due to buy-side firms being forced to liquidate positions, thus pushing highly shorted stocks higher because the positions have to be bought. "

Is that a question? If so, you missed the question mark. And of course in a market that is DUMPING, people on margin are going to be buying back their shorts and selling their longs, making the good stuff go down and the bad stuff go up (or down less in this case).

2008 Jan 29 09:36 AM