After the close yesterday, the first update on short interest readings of the new year with data through January 12th was released. As we noted at various points earlier this year, breaking down the Russell 1,000 into deciles shows that by far the worst performing stocks this year have been those that entered the year with the highest short interest levels. As shown below, the 10% of stocks in the Russell 1,000 that began the year with the highest short interest as a percentage of float are down an average of 8.18% YTD. That compares with an average gain of 1.11% for the decile of the least shorted names. While all other deciles have also fallen so far to kick off the new year, their losses are not nearly as large; mostly in the low single digits (across all Russell 1,000 members, the average year-to-date decline is currently 1.6%).

Breaking things down by industry further illustrates the story. As shown in the first chart below, the industry groups that currently have the highest degrees of short interest through mid-month are retailers, autos, and durables and apparel stocks. Those are also three of the sectors that have averaged some of the largest declines year to date. In fact, autos is down the most with an impressive 11% decline.

Meanwhile, insurance, utilities, and banks typically have the lowest levels of short interest. Performance is a bit more mixed here, but the group with the lowest average short interest reading, Insurance, is also the industry whose stocks have averaged the largest move higher so far this year.In fact, it is actually one of the few areas of the market to be sitting on a gain. As for Utilities, while also possessing low levels of short interest, the average stock has posted a large 5.3% decline.

Between this first short interest report of the year and where things stood at the end of last year, the average Russell 1,000 member did in fact see short interest rise marginally. In the table below, we show the 25 members that saw the largest increases. At the top of the list is recent IPO Instacart/Maplebear (CART). At the end of last year, short interest was already elevated at almost 29% of float. Since then, shorts have continued to pile in. Now over 40% of float is short, the most of any Russell 1,000 member. Ironically, despite the general underperformance of highly shorted names year to date, CART is actually headed into the final days of January up 5.67% in 2024. The next largest increase came from mobile game maker Playtika (PLTK). Short interest for this company has risen from just under 9% up to 15.4%. Unlike CART, this stock has experienced worse performance this year with a 13.5% decline. Of the list below, that is some of the weakest performance albeit there are far worse declines and higher current levels of short interest. Lucid (LCID) and Medical Properties (MPW) have seen declines of 30%+ YTD and more than a quarter of their float is shorted.

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