Shorts Still Clinging To Mid-Cap ETFs
Depending on where one looks, performances for mid-cap exchange-traded funds this year range from solid to spectacular. The SPDR S&P MidCap 400 ETF (NYSE: MDY) is solid with a year-to-date gain of 3.1 percent, although that trails the S&P 500.
The Appeal Of Mid-Cap ETFs
The WisdomTree MidCap Dividend Fund (ETF) (NYSE: DON) qualifies as spectacular with a year-to-date of over 12 percent, or more than triple the returns offered by the S&P 500. Despite those impressive performances, traders are not covering their short positions on mid-cap stocks nearly as rapidly as they are covering bearish bets on large caps.
“Average short interest of the constituents of the iShares Russel Top 200 has declined by 25 percent from 1.7 percent to 1.3 percent as of latest count. Meanwhile average short interest of the relatively high constituents of the iShares Russel Mid Cap ETF (the next 800 largest companies by market cap) has declined by relatively less, falling 11 percent, from 4.6 percent to 4.1 percent,” said Markit in a recent note.
The iShares ETF being referenced above is the $12.8 billion iShares Russell Midcap Index Fund (ETF) (NYSE: IWR). IWR is higher by 8.8 percent year-to-date.
Why So Shy?
“Perhaps short sellers (on average) expect that large caps have more to run in order to ‘catch up’ to the performance of midcaps or alternatively that the midcaps have scope to moderate lower,” noted Markit.
Within the mid-cap universe, short sellers have targeted consumer discretionary and healthcare names. Those are IWR's second- and fifth-largest sectors, respectively, combining for over a quarter of the ETF's weight.
“The ‘most shorted’ stock across the midcaps currently is ‘athleisure’ clothing retailer Under Armour Inc (NYSE: UA) with 28.1 percent short interest which has surged higher by almost double since the beginning of April. Short interest has risen and shares have plummeted on slower growth concerns,” according to Markit.
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