Hedge Funds Increase Bearish Bets on Consumer Stocks in August, Hazeltree Reports

Hedge funds significantly increased their bearish bets against consumer-focused companies in August as macroeconomic pressures mounted, while also re-evaluating positions in the artificial intelligence sector, according to a new report from data platform Hazeltree.

The shift in positioning reflects growing concerns over the impact of rising oil prices and global bond yields, which translate to higher fuel and borrowing costs for households.

Consumer Sector Under Pressure

The data indicates a sharp rise in short-selling activity targeting companies reliant on consumer spending. Of the 20 most-shorted North American large and mid-cap stocks in August, nine were consumer-focused, a significant increase from just four in July, Hazeltree reported.

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

• Kimberly-Clark, maker of Kleenex and Huggies diapers
• Food delivery service DoorDash
• Beverage company Keurig Dr Pepper

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The trend was also visible in Europe, where automaker BMW, luxury group Kering, and beverage giants Diageo and Pernod Ricard were among the most-shorted large-cap stocks. This hedge fund activity comes as the consumer discretionary sector has become the worst-performing on Wall Street this year, down approximately 5% compared to an 11% gain for the broader S&P 500.

Shifting Sentiment in AI

While some AI-related stocks like Super Micro Computer and GE Vernova remained heavily shorted, a notable shift occurred with Google's parent company, Alphabet. The tech giant dropped out of Hazeltree’s list of most-crowded long positions as the number of funds shorting the stock surpassed the number with long positions for the first time this year.

Hazeltree's report suggests this change is not due to deteriorating business fundamentals. Instead, the firm stated, "the selling appears to reflect the funding question rather than a view on the underlying business’s strength." Investors are reportedly paying closer attention to how companies are financing the billions of dollars required for AI infrastructure investments.