Short sellers shop around in US consumer services sector

Short sellers shop around in US consumer services sector

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Short interest in US consumer goods and services companies has risen 60% over the last year, data from Markit shows.

Worries about global growth and falling commodity prices have hit banks, oilers and mining companies, prompting some investors to pick US consumer spending as the growth area.

But sales of nonessential goods - repair services, electronics, cars and clothes - declined in January, while spending over the crucial December holiday shopping window was flat on the previous month.

That’s prompted short sellers to move in, with average demand to borrow shares in the consumer services sector now crossing the 4.5% mark.

That makes it the third most shorted sector behind oil & gas and basic materials firms.

Retailers, which stand to feel the brunt of the anaemic consumer spending, have been the most targeted by short sellers as the industry makes up six of the ten most shorted S&P 500 retail constituents.

Gamestop comes in as the most shorted of the lot with 40% of the firm’s shares now on loan as its stocks hit new multi-year lows after its earnings came in below analyst estimates.

Stats from Datalend show that the video game retailer was the most profitable stock for North American securities lending participants in 2015.

In total it made $101m revenue for agent lenders and beneficial owners combined.

Other retailers favoured by short sellers are Carmax, Nordstrom and Gap, all of whom see more than 12% of their shares now out on loan.

Outside of retailers, short sellers have been loading up on Discovery Communication and casino operator Wynn Resort.

The latter of the two has seen short sellers circle as its shares tumbled by over 80% from their highs in 2014.

 

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