The Shorties are Winning! 💪

The Shorties are Winning!

Amid pandemic and pandemonium yesterday, Britain’s flagship stock market lost a tenth of its market value. European stocks fell 11%, and the Dow Jones its furthest since Black Monday. Lucky investors are hanging in there. Smart investors are short-selling!

It’s a simple enough concept. You borrow a stock today and immediately sell it. You hope the stock goes down after you’ve sold it, because then when it comes time to hand it back, you can buy it on the cheap from the open market. Of course, many stocks are going down at the moment!

The Invstr Fantasy League (IFL) is top-heavy with short-sellers, and you can see it by putting a magnifying glass over individual picks. Bulls and bears trading Royal Caribbean Cruises are entirely split down the middle, 50% of the company’s shares sold short. That’s an incredible weight considering 5-10 per cent short-selling is deemed to be normal.

Flag carrier American Airlines is 51% short-sold, a tug of war emerging between Trump’s blanket ban on European arrivals, and Trump’s likely willingness to bail out big strugglers. Expedia, the travel agency, isn’t faring much better. Only 61% of investors are buying the name because, really, who in their right mind would go on holiday now?

Some stocks are less in the firing line, however, and aren’t so heavily bet against. The virus hasn’t spread into outer space yet, Richard Branson’s Virgin Galactic remaining 88% bull-driven in our community despite crashing 40% this week. Amazon is 89% favoured right now, but that might soon change given Bezos’s order for all employees to self-isolate.

It’s ‘stay at home’ stocks like China Online Education, Zoom, and Peloton, which lead the buying with Gilead Sciences, a front-running biotech company developing a vaccine as we speak. That one’s only 7% short-sold, and for good reason. You wouldn’t want to be sold short in your efforts to short-sell!

Technically, market prices can go up, and up, and up to infinity. That means potentially infinite losses, more than you put in. When you buy a stock normally, the lowest it can go is zero. That’s why in normal market conditions, investors should carve out a short position from many angles; valuation vertigo, technical trouble, bubble beliefs, and fraud feelings!

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