Short interest figures for the end of September were released after the close on Tuesday, and while overall levels of short interest remain relatively low by historical standards, a number of stocks are still heavily shorted. Within the S&P 1500, 38 stocks have more than one-quarter of their free-floating shares sold short, and below we list the 25 most heavily shorted names. For each stock listed, we have also included their performance so far in October. Looking at the list, one trend remains clear; the shorts are killing it this month. Of the 25 stocks listed, just five are up in October, while the remaining 20 are down. Overall, the 25 stocks listed are down an average of 4.57% (median: 3.46%), which is more than twice the decline of the S&P 1500 as a whole. Four of the stocks are down over 10%, including former hedge fund darling Restoration Hardware (RH). While the stock was in the triple-digits last year at this time, today it’s barely hanging on to $30.
Underperformance of heavily shorted stocks typically indicates a risk-off market. However, when these stocks start to show signs of outperformance, it usually indicates that a rally is at hand, so watch these stocks closely. Better yet, sign up for a free trial below and let us do it for you!