U.S. short sellers profited heavily from the chaos of 2022, to the tune of $ 300.1 billion, with communication-services stocks being the most profitable.
Profit from short selling U.S. stocks and American depositary receipts, on a mark-to-market basis, rose 30.8% in 2022, with an average short interest of $ 973.33 billion invested, according to a Wednesday report by S3 Partners Research. That followed three tough years in a row where short sellers lost a total of $ 571.76 billion, S3 Managing Director of Predictive Analytics Ihor Dusaniwsky said in a Wednesday note.
“But short sellers still needed to be good stock pickers in order to maximize
their returns,” Dusaniwsky said. “Even on a more macro level, picking which sectors to short produced wildly divergent returns.”
Shorting communications-service stocks on the S&P 500 Index SPX, +0.75% produced a 50.7% return of $ 80.8 billion, according to S3, while shorting industrial stocks netted a 47.6% return of $ 95.35 billion.
Meta Platforms Inc. META, +2.11% was the most profitable stock to short, with a 105% gain in 2022, S3 found.
Shorting Google parent Alphabet Inc. GOOG, -1.10% Class C shares produced a 48.1% profit of $ 2.67 billion, while A-share GOOGL, -1.17% shorts gained 48%, for $ 1.83 billion. Netflix Inc. NFLX, +4.90% shorts gained 76.3% for a profit of $ 2.28 billion.
Snap Inc. SNAP, +5.08% was the strongest return with a profit of $ 2.03 billion, a gain of 182% on the $ 1.11 billion vested.
As 2022 was wrapping up, S3 said that Tesla Inc. TSLA, +5.12% short sellers had profited $ 14 billion since CEO Elon Musk agreed to buy Twitter back in April. That rose to $ 15.85 billion by the end of the year, for a 83.8% gain — the biggest profit by dollar amount. The sector Tesla is included in, however, consumer staples, only produced an 8.7% return for shorts.
Amazon AMZN, -0.79% was in second place with shorts by dollar amount, clawing in $ 6.36 billion; Meta was in third place, with $ 5.53 billion; and Apple Inc. AAPL, +1.03% came in fourth, with shorts making $ 5.35 billion in 2022.
Incidentally, while Twitter was still a public company, short sellers lost $ 501.56 billion in 2022, a 37.3% loss.
As for the losing short bets in 2022: Shorting consumer-staples stocks produced a 28% loss, while materials stock shorts had a 3.2% loss.