The 50 Most-Heavily Shorted Stocks

As we noted in today’s Morning MoneyBeat, short sellers have found much more success this year compared to the brutal conditions they faced in 2013.

Companies like iron-ore miner Cliffs Natural Resources Inc.(CLF) and videogame maker GameStop have fallen more than 20% this year, and data from Markit shows that short sellers have managed to turn those steep declines into profits.

Indeed, ten of the 50 most-shorted stocks have seen their prices drop by at least 10% so far in 2014. Overall, the 50 most-heavily shorted S&P 500 stocks have dropped about 2% this year. By comparison, the S&P 500 is up 1% on a year-to-date basis.

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It’s a stark contrast from what transpired during last year's record-breaking rally, when short sellers faced their worst losses in at least a decade amid big rallies in heavily shorted companies such as Tesla Motors Inc.(TSLA) and Green Mountain Coffee Roasters Inc.(GMCR)

This year, five of the 50 most shorted stocks have seen their prices drop by at least 20% this year. Cliffs Natural tops the list, down 29% this year. Office retailer Staples Inc.(SPLS) is down 27% and GameStop has shed 22%.

It’s important to note how Markit calculates its data. The firm analyzes a company’s amount of stock out on loan as a percentage of overall shares, and uses that as a proxy for short-selling activity. Investors who want to short shares borrow the stock and then sell it, betting that the price of the shares will fall and that they can buy them back at a lower price, for return to the lender.

A stock-loan utilization rate is the proportion of shares available to borrow that are actually being used to short the stock. A high utilization rate, as expressed in the table below, is indicative of strong demand for shorting the stock. Markit uses a different dataset than the stock exchanges, which report short interest as a percentage of shares outstanding.

Without further ado, here’s a look at 50 of the most-heavily shorted S&P 500 stocks this year, courtesy of Markit.