When 99% of people buy stocks, they hope the price goes up and stocks have two places to go – up or down. If you buy the index, you are expecting over time, the price goes up, this is the normal. The other method to invest is to hope the price goes down, but only after a great deal of homework is done. The bias for analysts in Wall Street is the price to go in the medium or long term. Once in a while, expecting the other result for stocks to go down is a successful investment. Last year if you were short the big tech companies, you would have made a great deal of money.
In an article by Carolina Mandl and David Randall of Reuters, according to data from S3 Partners, short sellers are sitting on $303.7 billion in realized and unrealized gains, a fourfold increase compared with 2018 the last profitable year. The returns for the short sellers have been a 31.2% increase.
The top winners for short sellers have been Tesla, Amazon, Meta, Apple and Carvana. The S&P 500 is down almost 19% and on tract for its biggest yearly percentage loss since 2008.
Linking to dividend paying stocks, note some of the results from above, selling short was profitable in 2022, but the last time it was profitable was 2018. That means for 4 years, you might have lost money. Although share prices have decreased, dividends have increased in many companies, which suggests being conservative allowed you a reasonable return on your investments. One example is the big oil companies – the stock price is up and dividends, special dividends and share buybacks are common. If you buy for the dividend, you can allow for the stock price to fluctuate and still be contented as an investor.
There are more questions than answers, till the next time – to raising questions.