Short sellers reaped outsized gains on several bank stocks in the first quarter, in one of the few bright spots for investors betting against the U.S. stock market.
Traders betting against the shares of Silicon Valley Bank, First Republic Bank, Signature Bank and Charles Schwab all returned at least 40% for the quarter, and in some cases much more, according to research from S3 Partners published Wednesday. The collective profits on those four banks--the four most profitable short trades of the quarter--topped $2.75 billion.
"The regional bank 'contagion' created numerous shorting opportunities, with 95% of every dollar shorted in the Regional Banking sector being profitable," wrote Ihor Dusaniwsky, managing director of predictive analytics at S3.
The strong performance in a few names came amid an otherwise ugly quarter for short sellers, who borrow shares and then sell them, hoping to buy them back at a lower price later and pocket the difference.
Short sellers in the U.S. and Canada lost a collective $62.6 billion in the first quarter, which was the second straight quarter of losses, according to S3. Tesla was the least profitable short, costing bears $7.7 billion in mark-to-market losses.
