Sep 17, 2017

The smart money on Wall Street is shorting Amazon's rivals

Few bets have been smarter this year than wagering on Amazon's success, and against its top competitors. And now short-selling by investors suggests an increasing consensus that Amazon will not only continue to weaken its retail rivals, but soon dominate markets for fresh groceries and auto parts, according to Ihor Dusaniwsky of financial analytics firm S3 Partners.

Data: S3 Partners; Chart: Andrew Witherspoon / Axios

What this chart shows: "Short interest" measures the total bet against a company through short selling, a tactic in which investors bet that the share price of a company will drop. These data can also suggest what Wall Street's most sophisticated minds, like hedge fund investors, think about the economy, since it's unusual for average retail investors to use such instruments.

  • Look at a colossal one-way bet on Amazon and its top 10 retail rivals: "If a trader went long an equal amount of Amazon.com and shorted these ten securities, they would have been up 40% for the year," Dusaniwsky tells Axios. "A $100 million long Amazon position coupled with an equal weighted portfolio of the top ten Retail Sector shorts would have made $40 million in mark-to-market profits."
  • And a specific bet against one rival: Auto-parts stocks are another good example of investor faith in Amazon's ability to dominate any market it enters. A short position on the three most-shorted auto-parts stocks, paired with a bet on Amazon, would have returned 84% so far this year, Dusaniwsky says. This is after reports this summer that Amazon would begin selling car parts.

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