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LONDON / NEW YORK (Nov 11): Short sellers betting against travel, entertainment and bank stocks in Europe and the US lost billions of dollars on Monday, following news of a COVID vaccine -19 will trigger a rally in the shares of companies that have suffered for months from restrictions and lockdowns fueled by viruses.
Investors positioned to profit from declines in European travel, leisure and banking stocks lost more than $ 500 million on Monday, according to data provider ORTEX Analytics.
Among U.S. stocks, just seven travel-linked companies – Carnival Corp, Expedia Group, Booking Holdings Inc, Royal Caribbean Group, American Airlines Group Wynn Resorts and Norwegian Cruise Line Holdings – accounted for $ 2.35 billion in losses to short sellers, according to the signature data. .
Total short selling losses in all industries are likely to have been much higher. European travel and leisure stocks are up 12% since the beginning of the month, while bank stocks, which are sensitive to the state of the economy and are among the worst performers in markets since the coronavirus outbreak in March. , reached a five-month high on Tuesday. .
The Dow Jones Travel and Leisure Index for the United States rose 8.2% on Monday and almost 15% in November. On Tuesday, the index fell 1.7%.
This week’s dramatic rebound in hit stock prices followed Pfizer’s announcement of positive data from its vaccine test, raising hopes for an economic recovery. ORTEX Analytics calculations showed that European travel and leisure companies’ short sellers lost $ 284 million based on positions held on Monday.
The losses of the short sellers of the European banks amounted to 233 million dollars. Rolls-Royce, Carnival and British Airways owner IAG is among the biggest winners in this week’s rally, while bank stocks include Societe Generale, Barclays and Lloyds, all up 10%. and 25%.
But for short sellers, the rebound equaled the pain after several months of profitable betting: They lost roughly $ 101 million at Deutsche Lufthansa on Monday, $ 52 million at TUI and $ 66 million at HSBC, data from ORTEX showed.
“While Pfizer described yesterday as a great day for science and humanity, it was anything but short sellers who seem to have been caught up in the market tightening.” said ORTEX co-founder Peter Hillerberg.
Hedge funds make a profit when they borrow a stock and resell it when the price drops, pocketing the difference, a practice known as short selling.
Funds with significant short positions in travel and leisure stocks include DE Shaw, GLG Partners, which had a net short position in Rolls-Royce of 0.92% on November 4, and Marshall Wace, according to UK regulatory filings.
The funds declined to comment or did not respond to requests for comment. STILL SHORT Betting against travel and bank stocks had been a hit for hedge funds since governments shut down swaths of their economies in March.
Short sellers had made an estimated $ 1.87 billion on bank shorts from March to November 6 and $ 140 million betting against travel and leisure companies, ORTEX calculates. Investors have accumulated profits and reduced positions since August.
However, significant short exposure remained pending as some bet on further declines following another round of government lockdowns.
“Companies whose business models have been hit the hardest by COVID have not yet fully recovered from their lows,” Barclays analysts said in a note Tuesday.
“Therefore, they could be the biggest beneficiaries of a successful vaccine implementation, as their depressed income and profits have not yet recovered,” they added.
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