As Santa Claus prepares his carbon-free, reindeer-powered sled once more for delivering gifts this month, what companies are the grinches — short sellers and their minions — targeting in December?
Data-analytics firm S3 Partners has some data that can tell us. As a stocking stuffer, this month’s update also includes a few other providers of bearish omens.
On the 20 most shorted companies by percentage of float table, Canada Goose Holdings Inc. (GOOS-T) was once again at the top. As of Dec. 19, its short position stood at 34.5 per cent of float.
A newcomer to the table is Bitfarms Ltd. (BITF-T), a bitcoin mining company that had a relatively large increase in its short position over the 30 days to Dec.19, according to data analytics firm, S3 Partners.
Canada Goose had a high percentage of float sold short for most of 2023, as shown in the chart below. The short position has trended upwards since June.
There were no banks on the 20 most shorted companies by percentage of float table. But post-COVID escalation in interest rates and downturn in the economy raised some concerns about their loan portfolios, so it may be a relief to see that the chart below shows the percentage of float sold short did not trend upwards for the individual Big-Five banks during2023. Canadian Imperial Bank of Commerce (CM-T) did have a sudden upturn at the end but its short position has tended to be volatile in 2023 and it remains to be seen if the recent uptick will continue or fade.
Companies on the 25 most expensive stocks to borrow table tend to be small and difficult to sell short because of a low supply of loanable shares. Bearish sentiment thus tends to show up in the cost to borrow their shares instead of the percentage of float short. Some brokerage firms, particularly Interactive Brokers, share the lending fees with investors long the stocks. In some cases, the payments to borrow shares on the companies, such as Electrovaya Inc. (ELVA-T), have remained high for long periods of time.
Short sellers are not the only market participant that can express bearish sentiment — so can company insiders who sell shares in their company. But keep in mind that insider selling is not always a purely bearish signal because insiders may want to just diversify their holdings or raise cash to purchase a big-ticket item. That said, INK Research data shows that the company with the most insider selling ($67.2 million) over the past 60 days is Docebo Inc. (DCBO-T), a provider of e-learning platforms for enterprise companies.
The 10 lowest-ranked stocks by AlphaRank.com table shows the bottom decile of stocks scored by hedge fund Accelerate Financial’s proprietary multi-ranking system, AlphaRank. Included in the bottom decile is Laurentian Bank of Canada (LB-T), which Accelerate Financial Technologies has sold short because of the bank’s decelerating loan growth, declining earnings estimates and management turnover.
The Sell recommendations by brokerage analysts table shows what stocks that sell-side brokerage analysts have recently recommended selling (Dec. 19), according to TipRanks.com.
There was only one entry: Transat At Inc. (TRZ-T). Analyst Cameron Doerksen wrote in a note: “Winter yields could come under some pressure given the significant increase in overall industry capacity from Canada to sun destinations.”
Appendix: Methodological notes
1) Some short positions may reflect, in part or whole, hedging/arbitrage positions – so they may not be entirely bearish bets. This is particularly the case with the iShares S&P/ TSX 60 ETF, which many institutional and professional investors use to hedge out market risk from their portfolios. Note that if short selling becomes extreme, especially for individual stocks, it may trigger a short squeeze that sends the stock price higher.
2) Short positions in inter-listed stocks were summed across exchanges in Canadian dollars.
3) When an investor purchases stock that was sold by a short seller, it creates a synthetic long position; if these long positions are not included in the float count, the percentage-of-float-short metric can be overstated – however, most of the time, the magnitude is not significant.
4) The percentage of float short for ETFs is impacted by the mechanism for creating/redeeming units, which results in almost daily changes in the number of units issued. The percentage of float short for ETFs may thus be more volatile than for stocks.