The coronavirus outbreak has rocked the stock market and produced some major losses for investors in recent weeks. Since Feb. 24, the SPDR S&P 500 ETF Trust (NYSE: SPY) is down another 12%, but some stocks have taken much larger hits in that time.
The only traders that are enjoying the market sell-off have been short sellers, which have made a killing off the coronavirus.
From Feb. 24 to March 3, U.S. short sellers made more than $51.3 billion in mark-to-market profits, according to S3 Partners analyst Ihor Dusaniwsky.
“When looking at the most active shorted stocks, those with over $50 million of short interest, 90% of the stocks had positive mark-to-market P\L with an average return of +7.62%,” he said in a March 5 note.
Tesla Shorts Make Bank
One of the hardest-hit stocks during that period was heavily shorted electric vehicle maker Tesla Inc (NASDAQ: TSLA), which is down 18.5% since the beginning of last week.
Dusaniwsky said Tesla short sellers have earned more than $1.1 billion in profits in that stretch, making Tesla nearly twice as profitable of a short as any other U.S. stock in that period. Amazon.com, Inc. (NASDAQ: AMZN) was a distant second, with short sellers earning a mark-to-market profit of more than $505 million.
Despite the massive profits for Tesla shorts in recent weeks, short sellers have still gotten killed year-to-date. Dusaniwsky said they are still down more than $7 billion overall betting against Tesla in 2020.
Bullish sentiment among StockTwits messages mentioning Tesla plummeted from a peak of 76.2% on Feb. 21 to a six-month low of 47.9% on March 1.
Most Profitable Shorts
Here’s a look at the 10 most profitable shorts in the market since the beginning of last week, sorted by net mark-to-market profits:
- Tesla, +$1.1 billion
- Amazon, +$505.5 million
- Visa Inc (NYSE: V), +$477.7 million
- Eldorado Resorts Inc (NASDAQ: ERI), +$435 million
- Facebook, Inc. (NASDAQ: FB), +$359.7 million
- Wayfair Inc (NYSE: W), +$330.3 million
- EXACT Sciences Corporation (NASDAQ: EXAS), +$319.7 million
- Charter Communications Inc (NASDAQ: CHTR), +$318.8 million
- Zillow Group Inc (NASDAQ: Z), +$309.0 million
- VMware, Inc. (NYSE: VMW), +$301.7 million
The most profitable shorts are not necessarily the stocks that have dropped the most during the coronavirus scare, but rather stocks that have dropped significantly and also have large amounts of short interest. Traders may be short these stocks because they believe they are overvalued, or they may be short these stocks because they see them as high-beta hedges against a coronavirus-related stock market crash.
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Photo courtesy of Tesla.