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Exxon Overtakes Tesla in the Short-Seller Spotlight

In a notable shift on Wall Street, ExxonMobil has dethroned Tesla as the stock market’s prime target for short sellers, according to a HazelTree report. This energy titan, now wearing the crown as the most-shorted large-cap stock in the S&P 500, has ended Tesla’s four-month reign in this precarious position.

Short selling isn’t for the optimistic investor—it’s the practice of betting against a company’s stock, hoping to capitalize on a potential decline in share price. HazelTree’s “Crowdedness Score,” ranging from one to 99, gauges the intensity of short bets, with 99 marking the highest concentration of short interest from the funds they track. This firm keeps tabs on an extensive array of 12,000 global equities and over 700 funds.

In the league of large caps, ExxonMobil and Tesla are neck and neck with scores of 99 and 97, trailed by a mix of tech and industrial heavyweights like Apple, Charter Communications, Broadcom, and Rivian Automotive, with the financial, social media, automotive, and hospitality sectors also represented in the top ten.

The mid-cap arena shows its own set of short-seller darlings, with SOFI Technologies at the top, followed by American Airlines and luxury electric vehicle manufacturer Lucid Motors.

HazelTree’s analysis extends beyond the crowdedness of short bets to the nitty-gritty of short selling itself. For a bearish bet to take place, shares must be borrowed and sold with the hope of buying them back cheaper. The “hotness” of a stock, as HazelTree puts it, is a measure of supply and demand dynamics within the institutional lending space.

Rivian Automotive stands out, with 37% of its institutional shares supply utilized by short sellers, a stark contrast to Exxon’s 3.13% and Tesla’s modest 2.67%.

Examining performance, Exxon’s shares have seen a 6% dip year-to-date, while Tesla has charged ahead with a 76% gain. However, Tesla’s journey hasn’t been without turbulence, facing challenges from fluctuating EV demand and intensifying competition, leading to price reductions across its lineup.

Meanwhile, the broader stock market has kicked off November on a high note, with the S&P 500 experiencing its most impressive winning streak in two years. But not all analysts are buying into the euphoria. Mike Wilson, a prominent Morgan Stanley strategist, suggests this uptick might just be a bear market rally, influenced more by Treasury yield declines and weak economic indicators than any fundamental shift in investor sentiment.

Investors and entrepreneurs alike can glean insights from these movements. The short interest in a stock can be a signal of market sentiment, but it’s also a reminder that market winds can shift quickly, especially in sectors as volatile as energy and tech. Keeping a pulse on these shifts is vital, as they can impact not just individual stock strategies but also broader investment decisions.