An Amazon-based retail trade has quadrupled the stock market’s return this year – Markets Insider


Jeff Bezos
Even Jeff Bezos is surely surprised about the killing
you could’ve made going long Amazon and shorting the least
popular retail stocks.

Reuters

You could’ve made four times the S&P 500 this year if
you fully embraced an Amazon-driven retail apocalypse.

All you had to do was make bullish bets on Amazon while placing
bearish wagers on the most-shorted retailers, in proportion to
their short interest, according to data compiled by the
financial-analytics provider S3 Partners. Putting $100 million to
work on either end of the trade would’ve netted a 43.7% return in
2017, according to the firm’s data.

That’s more than quadruple the benchmark S&P 500’s roughly
10% gain this year through last week’s close and well over double
the return for the Nasdaq Composite
index, which has climbed 18%.

One company that’s recently been feeling the effects of Amazon’s
growing influence is Target, which announced last Friday that it
had lowered prices on
thousands of items
in an attempt to wrestle back market share
from the e-commerce juggernaut. Investors remained unconvinced
and sold the company’s stock, sending it down 2% on the day.

It’s just the latest sign of trader skepticism around Target,
which is the most-shorted stock in the multiline retail sector
and would’ve therefore been the biggest bearish target in the
aforementioned pair trade, according to S3.

Investors are holding almost $3.3 billion of Target shares short,
after having made $480 million in mark-to-market profit betting
against the company so far in 2017, according to S3’s data.

But Target is just one of many retailers getting hit hard as the
industry adjusts to a new reality in which customers are
increasingly using online outlets like Amazon for their shopping
needs. As of Wednesday, 6,403 store
closings
had been announced this year, Business Insider
reported.

The most-shorted multiline retail stocks as a group have lost
13.6% this year. That stands in stark contrast to Amazon’s nearly
30% gain.

So what other retailers beyond Target are in the crosshairs of
short sellers? No surprises here: Kohl’s, Dollar General,
Nordstrom, and Macy’s round out the top five. Here’s a full list
of the most-shorted basket, courtesy of S3 Partners:


Screen Shot 2017 09 11 at 2.53.36 PM
A breakdown of the
most-shorted multiline retail stocks.


S3
Partners



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