So here’s the thing about October: while everyone was busy arguing about pumpkin spice everything, hedge funds were quietly betting against some of tech’s biggest names. And by “betting against,” I mean short-selling them like they’re going out of style.
The Nasdaq had a pretty solid month, climbing nearly 5%. You’d think that would make everyone happy, right? Wrong. Apparently, when tech stocks do well, some very smart (and very wealthy) people start getting nervous. It’s like that friend who gets suspicious when everything’s going too well in their life.
The Numbers Don’t Lie (Unlike Your Ex)
According to Hazeltree’s latest report on who’s shorting what, tech stocks made up 23% of all short positions in October. That’s a 17% jump from September. To put it in perspective: if short positions were a pizza, tech would be nearly a quarter of it. And trust me, that’s a big slice.
The hall of fame for most-shorted large caps reads like a tech conference guest list: Palo Alto Networks, IBM, Qualcomm, Cloudflare, and Super Micro Computer all made the top 10. Palo Alto Networks took the crown with a “crowdedness score” of 99 out of 99. That’s like getting 100% on a test where the question is “Will this stock disappoint me?”
Why the Hate?
It’s not personal (well, maybe a little). Here’s what’s got investors spooked:
First, valuations are getting pretty spicy. When price-to-earnings ratios hit “historically high” levels, it’s like seeing a $20 avocado toast on a menu – technically possible, but makes you question everything.
Second, there’s the whole U.S.-China trade drama. Qualcomm, for instance, got caught up in rare-earth supply chain issues. Nothing says “investment uncertainty” like geopolitical tensions affecting your semiconductor supply.
Third, we’ve got macroeconomic concerns floating around like that one friend who always brings up their problems at parties. Government shutdowns, inflation worries – you know, the usual suspects.
It’s Not Just Tech Having a Bad Time
Consumer stocks are also getting the short treatment, making up 41% of global short activity. Campbell’s Soup topped the midcap short list, which honestly feels a bit harsh. I mean, it’s soup. How controversial can soup be?
Even travel got hit – Allegiant Travel and Hertz were the most shorted small caps. Hertz had an 88% institutional supply utilization rate, which is finance speak for “really, really shorted.”
The Bottom Line
Here’s the thing about short selling: it’s not necessarily a prediction that these companies will fail. It’s more like hedge funds saying, “Hey, maybe these stocks are a bit overpriced right now.” It’s the market’s way of keeping things honest, like that brutally truthful friend who tells you when your haircut looks weird.
Whether they’re right or wrong, only time will tell. But one thing’s for sure – October proved that even in a good month for tech, someone’s always ready to bet against the house.