The major exchanges released short interest figures for the end of April after the close on Tuesday, and while overall levels of short interest didn’t see much in the way of major changes, the number of heavily shorted stocks continues to expand as 61 stocks in the S&P 1500 now have more than a quarter of their float sold short.  In the interest of space, the table below lists the 20 stocks in the S&P 1500 with the highest levels of short interest as a percentage of float.  As shown in the table, these stocks have been performing admirably so far in May with an average gain of 5.32% and a median gain of 4.03%.  The big winner on the list has been World Acceptance (WRLD) which has rallied over 57%, helped in large part by a positive earnings report on Tuesday.

Retail Short Interest 051017Another trend in the semi-monthly short interest figures over the last few months has been the strong presence of retail-related stocks.  As shown in the chart, short interest as a percentage of float for the group is currently over 13% and at its highest level since the Financial Crisis.  Obviously, with Death By Amazon, sentiment towards the retail sector is tilted to the negative side, and while our longer term view towards brick and mortar retail is negative, nothing moves in a straight line.  There will be times when sentiment gets too extreme and the sector will rally.

One example of this shows up in the most recent short interest data.  As shown, seven of the twenty stocks highlighted are retailers, ranging from RH with over 45% of its float sold short to JC Penney (JCP) which has close to 38% of its float sold short.  In terms of performance, though, six of the seven stocks highlighted are up so far in May with an average gain of 7%. With some of these companies starting to report results that weren’t quite as bad as the market expected, the group is catching a break.

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