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For the month ending March 28, short sellers trimmed their bearish bets on the direction of the Toronto Stock Exchange, as proxied by a drop in the short position for the iShares S&P/TSX 60 ETF (XIU-T) to $2.2-billion from $2.9 billion. XIU’s price gained 4.4 per cent over the month.

At the company level, Air Canada (AC-T) led the way with 33.7 per cent of its float sold short, according to data-analytics firm S3 Partners. This is the eighth month in a row that the company has been at, or near, the top of the list for the 20 most shorted companies.

Airlines cannot get a break. After the Omicron variant of COVID-19 ebbed in February, oil and gas prices spiked following Russia’s invasion of Ukraine on Feb. 24. Fuel is a major cost for airliners. But Air Canada’s short position may reflect, at least in part, hedging by holders of its convertible debt – so, the size of the short position could exaggerate bearish sentiment.

Top 20 short positions by percentage of float (March 28)

Air CanadaAC-T33.7%
Canopy Growth Corp.WEED-T25.8%
Lion Electric Co.LEV-T22.6%
iShares S&P/TSX Energy ETFXEG-T20.2%
Silver Elephant Mining Corp.ELEF-T20.2%
iShares S&P/TSX 60 ETFXIU-T19.9%
Aurora Cannabis Inc.ACB-T19.8%
Hexo Corp.HEXO-T19.6%
Meta Materials Inc.MMAT-Q16.1%
Exco Technologies Ltd.XTC-T14.8%
Fidelity Intern High Dividend ETFFCID-T14.3%
Ballard Power SystemsBLDP-T13.8%
Tilray Inc.TLRY-T13.7%
Energy Fuels Inc.EFR-T13.4%
Horizons Us Dollar ETFDLR-T13.3%
Briacell Therapeutics Corp.BCT-T13.1%
Dirtt Environmental SolutionsDRT-T13.1%
Morguard REITMRT.U-T12.6%
Sundial Growers Inc.SNDL-Q12.6%
Lithium Americas Corp.LAC-T12.6%

Source: S3 Partners

Cannabis stocks have been on the top-20 list of shorted stocks for more than two years. Appearing this month were: Canopy Growth Corp. (WEED-T), Aurora Cannabis Inc. (ACB-T), Hexo Corp. (HEXO-T), Tilray Inc. (TLRY-T) and Sundial Growers Inc. (SNDL-Q). A recent mini-rally in cannabis stocks was likely linked to speculation that cannabis may soon be legalized at the federal level in the United States. But industry competition remains high due to the number of producers, home production and black-market sales.

Short interest was 22.6 per cent of float for Lion Electric Co. (LEV-T), a maker of electric trucks and buses. It went public a year ago through a special purpose acquisition company (SPAC). Early-stage renewable energy companies offer significant promise, but their rich valuations are wilting as monetary policy shifts to dampening the economy to fight inflation. But recent spikes in oil-and-gas prices could potentially revive the appeal of electric vehicles.

Largest increases in short positions by dollar value

During the three-months to March 28, chartered banks dominated the list of companies with the largest increases in short sales.

TD BankTD-T$966.0
Royal Bank of CanadaRY-T$699.0
iShares S&P/TSX 60 ETFXIU-T$577.6
Canadian Nat ResourcesCNQ-T$564.3
Bank of Nova ScotiaBNS-T$490.8
Bank of MontrealBMO-T$465.5
TC Energy Corp.TRP-T$421.2
Agnico Eagle MinesAEM-T$419.3
Fortis Inc.FTS-T$397.8
BCE Inc.BCE-T$395.4
Wheaton Precious MetalsWPM-T$378.0
iShares Core S&P/TSXXIC-T$287.3
Cenovus EnergyCVE-T$249.0
National Bank of CanadaNA-T$222.5
BMO S&P/TSX Eq Wt. Banks ETFZEB-T$202.5
iShares S&P/TSX Energy ETFXEG-T$175.0
Pembina Pipeline Corp.PPL-T$173.8
Teck Resources Ltd BTECK-B-T$149.7
Enbridge Inc.ENB-T$133.4

Source: S3 Partners

Largest decreases in short positions by dollar value

During the three-months to March 28, the top three companies with declining short sales were: Canadian Pacific Railway Ltd (CP-T), Shopify Inc. (SHOP-T) and Brookfield Asset Management Inc. (BAM.A-T).

CP RailwayCP-T-$5,877.8
Shopify Inc.SHOP-T-$633.8
Brookfield Asset MgtBAM.A-T-$394.0
Cameco Corp.CCO-T-$340.4
Kirkland Lake Gold Ltd.KL-T-$332.8
Lightspeed Commerce Inc.LSPD-T-$299.2
Aurinia Pharmaceuticals Inc.AUPH-Q-$258.7
Blackberry Ltd.BB-T-$217.2
Lululemon AthleticaLULU-Q-$206.3
Power Corp. CanadaPOW-T-$201.3
Ballard Power SystemsBLDP-T-$198.8
iShares MSCI Canada ETFEWC-N-$194.8
Tilray Inc.TLRY-T-$170.3
Sun Life FinanceSLF-T-$166.8
Magna InternationalMG-T-$157.5
Aurora Cannabis Inc.ACB--$152.7
Canopy Growth Corp.WEED-T-$143.2
B2Gold Corp.BTO-T-$140.8
Air CanadaAC-T-$136.7
Suncor EnergySU-T-$115.6

Trend in short interest in U.S. stocks as a percentage of shares outstanding

Matthew Ringgenberg, a professor of finance at the University of Utah, concluded in his 2006 study published in the Journal of Financial Economics that “short interest is arguably the strongest known predictor of aggregate stock returns.”

Since then, he has updated his time series, which show that the downtrend of recent years is still in place (as shown in the accompanying chart). According to Prof. Ringgenberg, this decline in bearish bets is a bullish signal for the stock market in the year ahead. Unlike the run-up to the Crash of 2008, there currently is no rising trend in short interest.

Open this photo in gallery:

Matthew Ringgenberg/The Globe and Mail

Larry MacDonald writes at Investing Journey (

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