No Haven for Hedge Funds in Tech Rout as Shorts Don't Cooperate

  • Goldman’s most-short stocks extended gains, driven by energy
  • Wrong-footed bets added to pains as tech longs reversed course

Market Bites Into FAANG Stocks in Tech Selloff

It’s a rough day when your shorts turn against you just as virtually every major stock benchmark is tumbling.

Such was the plight of hedge funds Monday, as bearish bets on energy and industrial companies backfired even as their favorite longs in tech shares led a market retreat.

It’s a dose of pain for an industry that has been on a firmer footing in 2017 thanks in part to its devotion to shares ensnared in the rout that began Friday afternoon. A Goldman Sachs Group Inc. basket of most-shorted stocks advanced 0.2 percent Monday, compared with a 0.1 percent decline in the S&P 500 Index and a 0.6 percent slide in the Nasdaq 100 Index that delivered the biggest two-day loss for the tech-heavy measure since September.

Facebook Inc., Apple Inc., Inc., Microsoft Corp. and Google parent Alphabet Inc., the “FAAMG” group that according to Goldman had been the top contributors to hedge fund returns in the first five months of the year, have each lost at least 3 percent since the selloff started Friday.

  • Gains in Goldman’s most-shorted basket, which tracks 50 stocks with the highest short interest in the Russell 3000 Index, was led by advances in EP Energy Corp. and Avis Budget Group Inc. 
  • Among S&P 500 stocks with at least 20 percent of their shares borrowed and sold, Under Armour Inc., Discovery Communications Inc., CenturyLink Inc. and Helmerich & Payne Inc. rose more than 1.9 percent Monday; Nordstrom Inc., the No. 2 most shorted, was up 4.1 percent over two days.
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