Hedge funds step up bets against consumer stocks in August, Hazeltree says

• Nine of the 20 most-shorted North American stocks were consumer-focused in August, up from just four in July, with new additions including Kimberly-Clark, DoorDash, and Keurig Dr Pepper
• Alphabet dropped from Hazeltree's most-crowded long positions list as short positions exceeded long positions for the first time in 2024, reflecting concerns about AI funding rather than business fundamentals
• European consumer stocks including BMW, Diageo, Pernod Ricard, and Gucci-owner Kering were among the most shorted, while AI infrastructure firms remained in top short positions

Summary: Hedge Funds Increase Short Positions on Consumer Stocks

Hedge funds significantly increased bearish bets against consumer-focused companies in August while reducing some short positions on AI-related stocks, according to Hazeltree data released September 16.

Key Developments:

Consumer discretionary stocks emerged as Wall Street's worst-performing sector in 2024, down approximately 5% compared to an 11% gain in the S&P 500. Rising oil prices, escalating Middle East conflict, and higher global bond yields contributed to increased fuel prices and borrowing costs, pressuring consumer spending.

Most-Shorted Companies:

New entrants to the most-shorted large U.S. companies list included:

• Kimberly-Clark (Kleenex, Huggies)
• DoorDash
• Keurig Dr Pepper

Among the 20 most-shorted North American large and mid-cap stocks, nine were consumer-focused companies in August, up from just four in July.

European Markets:

Consumer-exposed stocks dominated short positions, including:

• BMW (automaker)
• Diageo and Pernod Ricard (beverages)
• Kering/Gucci (luxury retail)

AI Sector Shift:

While AI infrastructure companies like Super Micro Computer, Coreweave, Nebius Group, and GE Vernova remained in the top 10 short positions, overall AI-related short bets decreased. Notably, Alphabet dropped from Hazeltree's most-crowded long positions list, with short positions exceeding long positions for the first time in 2024.

Market Implications:

Hazeltree attributed Alphabet's shift to funding concerns rather than business fundamentals deterioration, as billions pour into AI investments. Investors are closely monitoring how companies finance these substantial capital expenditures, raising questions about AI investment sustainability.