Short sellers increasingly bet against the consumer staples sector in the first half of August, wagering on the potential for currently robust consumer spending to wane later this year.
Short interest in consumer staples stocks traded on major US exchanges jumped 49 basis points at mid-August from the end of July to 3.65%, pushing the sector to the third most-shorted, according to the latest S&P Global Market Intelligence data. Short sellers are still sensing the most weakness in consumer discretionary stocks, prolonging the category’s reign as the most-shorted sector for a nineteenth month amid expectations of a potential slowdown in consumer spending as interest rates remain high.
Average short interest across the S&P 500 sat at 2.29% in mid-August, a slight rise from the end of July.
Short interest measures the percentage of outstanding shares of a given company or industry held by short sellers, who seek to profit from a stock’s decline by borrowing shares to sell at a high price, then repurchasing them after a drop and pocketing the difference.
Most shorted stocks
With 39.32% short interest, Edible Garden AG Inc. — a consumer staples stock — was the most-shorted stock across major US exchanges as of mid-August. Shares in the produce company have dropped more than 70% since the start of the year.
Fisker Inc. — a consumer discretionary stock — was the second most-shorted stock with short interest at 38.72%, up from 36.11% as of mid-July. Short sellers continue to bet against the electric vehicle company as its shares have lost nearly 15% in value since the start of 2023.
Consumer staples
Among the consumer staples category, Edible Garden and Beyond Meat Inc. stocks were by far the most shorted as of mid-August. Edible Garden farms and sells hydroponically grown produce, while Beyond Meat produces plant-based meat substitutes.
The top four most-shorted consumer staples stocks as of mid-August — Edible Garden, Beyond Meat, Sprouts Farmers Market Inc. and Blue Apron Holdings Inc. — were all companies with a primary focus on manufacturing or selling food items.
Overall, consumer staples stocks have been drawing less and more stable interest from short sellers in 2023, with the average short interest among all consumer staples stocks hovering above 3% for most of the year.
Short sellers had been betting more heavily against consumer staples stocks throughout most of 2022, as US inflation peaked at 9% in June 2022 and remained elevated through the end of the year.
Still, the most recent reading for mid-August marked the highest average short interest for the sector this year, as high interest rates and the potential for additional rate increases could pressure consumer spending.
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