Cannabis stocks bounced back on Friday, trading higher in sympathy with a big earnings beat and 35% gain from Aphria Inc (NYSE: APHA).

After a hot start to the year, most cannabis stocks limped into second-quarter earnings season on an extended losing streak, and financial analytics firm S3 Partners said this week that short sellers see an opportunity in marijuana.

Top Cannabis Shorts

As of Aug. 1, S3 analyst Ihor Dusaniwsky said there’s now more than $5.1 billion in short interest among cannabis stocks under S3 coverage. Here’s a rundown of the five largest cannabis short positions:

  • Canopy Growth Corp (NYSE: CGC) – $1.48 billion short interest.
  • Aurora Cannabis Inc (NYSE: ACB) – $782 million short interest.
  • GW Pharmaceuticals PLC- ADR (NASDAQ: GWPH) – $655 million short interest.
  • Cronos Group Inc (NASDAQ: CRON) – $554 million short interest.
  • Tilray Inc (NASDAQ: TLRY) – $273 million short interest.

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The average stock loan fee short sellers are paying to bet against cannabis stocks is 16.75%, according to S3. Each of the five stocks mentioned has a short percent of float above 12%.

Throughout 2019, shorts have increased their positions in cannabis stocks by $1.4 billion. Short sellers added another $169.7 million to their bearish bets in the month of July, Dusaniwsky said.

Canopy was again the most popular cannabis short in July, with short sellers adding $69.6 million to their position. GW Pharma was the next most popular cannabis short last month with $59.5 million added, followed by Aurora at $47.5 million.

Heavy Losses

Even after the recent weakness in cannabis stocks, Dusaniwsky said short takers have taken a $690 million year-to-date loss on their cannabis bets. He said the cannabis pullback seems to have emboldened shorts.

“Neither the excessive price volatility relative to the overall market nor high financing costs is deterring shorts from building and holding onto their positions and single name short squeezes do not look to be in any of these top 20 stocks’ near-term future,” he said.

If the trend continues in the cannabis market, traders can look for short sellers to continue to build their positions throughout the remainder of 2019.

Benzinga’s Cannabis Capital Conference heads to Detroit on Aug. 15 — click here to learn more!

© 2019 Benzinga does not provide investment advice. All rights reserved.

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