Consumer discretionary stocks now are the largest category of shorted stocks, a recent S&P Global Market Intelligence report found.
“Consumer discretionary companies sell goods and services viewed as nonessential, such as apparel and vehicles,” the report said. The biggest companies in the consumer discretionary sector, like Amazon.com Inc. (AMZN), Tesla Inc. (TSLA), The Home Depot Inc. (HD) and Nike Inc. (NKE) exceeded expectations and performed exceptionally well during the coronavirus pandemic after consumer spending was largely redirected to retail industries.
Meme stocks like GameStop (GME) and AMC (AMC) were subject to ‘short squeezes’ where the stock prices rose sharply over a short period of time. In those cases, the short squeezes were driven by a frenzy of stock purchases to raise the stock prices and then the subsequent covering of shorts. Retail investors were integral to this push, as much of the activity can be traced back to social media groups like Reddit’s “r/WallStreetBets”.
Many of these meme stocks are consumer discretionary companies. Corporations like the aforementioned GameStop and AMC, as well as electronics giant Best Buy (BBY), have undergone major short squeezes within the past year. Some experts have even called for meme stocks to be labeled as their own distinct asset class.
“The recent rise in short bets comes as government stimulus has largely ended, expanded unemployment benefits are nearing an end and concerns over the spread of the coronavirus Delta variant have squeezed consumer confidence,” the report said.
Consumer discretionary companies have suffered in part from the end of unemployment benefits in most states, and national benefits are set to expire later this month. Rising inflation also threatens to eat into consumer incomes.
For the S&P 500 (^GSPC), Big 5 Sporting Goods Corp. (BGFV) led the pack of highly-shorted companies, with Workhouse Group Inc. (WKHS), Beam Global (BEEM), Esperion Therapeutics Inc. (ESPR), and Blink Charging Co. (BLNK) closing out the list for the top-5 most shorted companies as of mid-August 2021, according to the data. BGFV, a sporting goods retailer, had over 35% of its outstanding shares held by short sellers, the most of any stock on any major stock exchange.
Short sellers, who on average comprise only 2.2% of shares in the S&P 500, hold 4.6% of outstanding shares in consumer discretionary stocks, the highest of any sector.
After consumer discretionary, the highest shorted stocks were Healthcare (4.5% short sellers), Information Technology (3.5%), Consumer Staples (3.4%), Communication Services (3.2%), and Energy (3.2%).
Ihsaan Fanusie is a writer at Yahoo Finance. Follow him on Twitter @IFanusie.