Why Apple Overtook Tesla As the Most-Shorted Stock in the S&P
Full Video Transcript Below
MARTIN BACCARDAX: So for the past two and a half years or so, Tesla has been the most bet against market in the stock, largely because, well, there are some skeptics against the company's business model, there's no question about that. But it's been one of the most actively traded and also actively traded in the options market, so that engenders a lot of activity in short selling.
It's not always lucrative, although this year it certainly has been. Apple has overtaken Tesla as the most shorted stock in the market as of this week. There's about $16.3 billion in bets against Apple compared to about 16.1 billion in bets against Tesla. Now, you could argue that this is skepticism against Apple's business model going forward, and we talked about this a couple of times this week, J.D., with respect to the underwhelming response that we saw in the product launch earlier this week and the fact that Apple is going to struggle at the high price point when investors are pulling back on discretionary spending.
But what I think is representative of is the fact that Apple is a good way to play the market short rather than the stock. In other words, Apple sits in the most important indices in the United States, and it makes up the most significant weight in the S&P 500. If you put Tesla and Apple together, they're about 9% of the entire market cap of the S&P.
So shorting those stocks is a proxy for shorting the market. And if the anticipation is that the Fed has that soft landing, which they tame inflation but keep growth going, that short probably won't materialize into profitability. But if the Fed doesn't engineer that and we end up with a recession in the first quarter of 2023, the market is going to react accordingly and those shorts will pay off. So I think to some degree it's more of a representation of that than it is the metrics of either company, although you could argue to and fro for both of those over a number of weeks.
