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The bull market made it difficult for investors to bet against stocks, which is why the practice of short selling is on the decline.
In the first six months of this year, there were only 113 short campaigns, down from an average of over five a year in the preceding five years and less than half of 2016's tally.
The returns have been impressive for those that continue to lead activist short campaigns.
The S&P 500 has closed at a record high more than 60 times this year, making betting against the stock market a losing game. The profits have been big for investors in the short selling game.
The bull market made it difficult for short-sellers to make money because stock prices have been up more than they have been down. Record corporate earnings, historically low interest rates, and a financially healthy consumer are all factors that short-sellers have to combat.
According to data from Activist Insight Shorts, the environment has led to a decline in activist short campaigns. The number of short campaigns has fallen from an average of five years ago to less than half of 2016's tally.
Short interest in broad-based market exchange traded funds and individual stocks used to be popular with short-sellers, but that is no longer the case. According to data from Koyfin, the short interest inTesla has fallen from 24% to 3%.
The environment has taken a toll on short-sellers. Russell Clark told his clients earlier this month that he was shutting down his hedge fund. The S&P 500 was up more than 20% over the same time period, while the RC Global Fund lost 2.6%.
The gains have been big for the activist short-sellers. According to data from Breakout Point, shares targeted by activist short campaigns are down 25% on average for the first three quarters of the year.
"For their standards, that's very, very good," Ivan osovi said.
Night Market Research has posted four short calls so far this year, with an average decline of 42% in the stock. The activist shorts issued by Hindenburg Research this year have an average decline of 40%.
"It's a great time to be an activist short-seller because there's an infinite number of companies you can expose," Kir Kahlon of Scorpion Capital told Insider.
Business Insider has an original article.
