Short Interest Through The End Of March

On Monday, short interest data through the end of March was released. ln aggregate for Russell 3,000 stocks, short interest as a percent of equity float is little changed versus where it stood in mid-March. But on an industry basis, there have been some large moves. Compared to midway through last month (red dashes in the chart below), the Pharma, Biotech, and Life Sciences industry saw short interest build by the most rising 0.68 percentage points. Of the other industries, there were eight that also saw higher short interest than the prior report. Conversely, the Telecom Services industry saw short interest fall the most of any sector dropping 0.46 percentage points between reports. While the moves between the most recent and the prior report were not very large, across the board, just about every industry has significantly lower average short interest levels now than at the start of the year (green dashes). That is especially the case for Retailing which has seen average short interest fall by 4.89 percentage points.

Earlier in the year, short interest appeared to be a key driver of performance. During the GameStop (GME) saga, the most heavily shorted stocks were some of the best performers. Fortunately for short-sellers, over the past month, the opposite has been the case. The stocks that had the highest short interest as a percent of float at the end of March have averaged a decline of 10.99% over the past month. Comparatively, stocks with low short interest have fared much better albeit still lower on average.

We would also note that while every decile based on short interest has averaged a decline over the past month, the Russell 3,000 has actually pushed to new highs. That is because the largest stocks by market cap have been driving the capitalization-weighted index higher.

In fact, one other notable theme of performance recently has been market cap. The deciles of the largest stocks (deciles 9 and 10) are the only ones whose stocks have averaged a move higher over the past month. On the other hand, the other deciles have averaged declines with the severity of those declines getting worse with smaller market caps.

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