2022 marked a successful year for short sellers, as the S&P 500 declined by about 19%. According to S3 Partners, shorted stocks returned 30.8% last year, outperforming the benchmark index by a wide margin. In total, U.S. short sellers collected about $300 billion in mark-to-market profits.
Out of all the stocks that had at least $100 million in short interest, Carvana (NYSE:CVNA) rewarded short sellers the most. CNBC notes that CVNA had a staggering short gain of 377.6%. Likewise, Beyond Meat (NASDAQ:BYND) rewarded short sellers with a 128.2% return.
As of Dec. 30, the information technology sector was the most-shorted sector based on dollar terms, with total short interest of $166.03 billion. The consumer discretionary sector came in second with a short interest of $137.43 billion.
5 Short Squeeze Stocks With High Cost to Borrow Fees
Cost to borrow (CTB) fees are one of many indicators to observe when shorting a stock. Generally, a high CTB fee implies high short seller demand. This is because as the number of shares available to short falls, lenders must charge a higher fee in order to keep up with demand. These fees are also used as a factor in a short seller’s risk/reward scenario. A higher CTB fee will lower the chances of a profitable short trade.
In addition, a high CTB fee may also be indicative of a short squeeze. S3 Partners Managing Director Ihor Dusaniwsky explains:
“An increase in stock borrow rates may force (squeeze) some short sellers into closing their positions — getting out to realize their remaining mark-to-market profits and exiting before other buy-to-covers drive the stock price up.”
With that in mind, let’s take a look at the highest borrow fees for the top five stocks with short interest over $100 million as of Dec. 30:
- Beyond Meat: 102.57%. Short interest: 39.80% or $281.32 million.
- AMC Entertainment (NYSE:AMC): 44.57%. Short interest: 22.00% or $461.71 million.
- MicroStrategy (NASDAQ:MSTR): 43.32%. Short interest: 36.47% or $482.42 million.
- Nikola (NASDAQ:NKLA): 40.32%. Short interest: 29.75% or $220.53 million.
- Fisker (NYSE:FSR): 24.57%. Short interest: 33.51% or $428.17 million.
Beyond Meat tops the list with a CTB fee that’s more than double AMC’s fee in second place. The fake meat company has been on a steady decline since its initial public offering (IPO) in 2019. Meanwhile, meme-favorite AMC has the second-highest short interest in terms of dollar value on the list.
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On the date of publication, Eddie Pan did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
