Short Sellers Digging In On FANG Despite $3.3 Billion In Losses This Year

So-called “FANG” stocks Facebook Inc FB, Amazon.com, Inc. AMZN, Netflix, Inc. NFLX and Alphabet Inc GOOG GOOGL are once again leading the stock market higher in 2017. All four tech giants are up between 20 and 31 percent year-to-date. While FANG has been a painful bet for short sellers this year, S3 Research reports stubborn short sellers continue to place large bets against the FANG stocks.

Short Sellers' Losses

According to analyst Ihor Dusaniwsky, short sellers have lost a combined $3.3 billion on FANG in 2017. Yet despite the battering, short interest in each of the four stocks is up between 13 and 58 percent this year. Sellers are most aggressively betting against Alphabet’s GOOG shares. GOOG short interest is up 58.1 percent so far in 2017.

While some investors may be hedging long bets elsewhere, Dusaniwsky says the increase in short selling likely has to do with FANG’s outperformance relative to the rest of the Nasdaq. The S&P 500 is up less than 7 percent in 2016, the Nasdaq is up roughly 13 percent and the FANG stocks have averaged a 26 percent gain.

“It is not surprising that the FANG stocks are all in the top ten most shorted stocks in the U.S. or that the top ten most shorted stocks are easily beating year-to-date market returns and are up 21 percent for the year,” Dusaniwsky explained. “What is surprising is that short sellers continue to build their positions as they rack up large mark to market losses month after month.”

S3 Research reports that Amazon is the FANG stock responsible for the most short seller carnage this year. Shares of Amazon are up 25.7 percent in 2017, and the stock has cost short sellers a total of more than $1 billion in losses.

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