Short interest in the so-called FAANG tech stocks reached $27.66 billion on Monday, and nervous investors who placed these bearish bets enjoyed a two-day mark-to-market gain of $1.62 billion, or 5.86%, during the tech pullback on Friday and Monday, according to a June 13 research report from S3 Partners LLC. The FAANG stocks include Facebook Inc. (FB), Inc. (AMZN), Apple Inc. (AAPL), Netflix Inc. (NFLX) and Alphabet Inc., the parent of Google. In their analysis, S3 Partners included both the Alphabet Inc. Class A shares (GOOGL) and the Class C shares (GOOG).

As a sign of growing bearish sentiment, short interest in the FAANG stocks as a group increased by a net $5.42 billion over the 30 days ending on June 12, per S3 Partners. Apple led the group with a $4.67 billion increase in short interest, while short interest declined for Facebook and Netflix. As a point of comparison, short interest in the 10 most shorted non-FAANG tech stocks reached $23.99 billion on Monday, and the mark-to-market gain during the two-day tech selloff on this group of shorts was only 0.56%, S3 Partners calculates.

Why FAANG Stocks Got Bitten

As S3 Partners analyzed the situation, the largest and most popular holdings, most notably the FAANG stocks, were the most likely candidates for selling by long investors who wanted "to not only reduce their market exposure, but also to realize profits before they vaporized." Furthermore, S3 Partners finds that the tech downdraft on June 9 and 12 was the result of selling by long investors, and was not produced by a sudden surge in short interest that drove down prices. Short interest in the FAANG stocks increased by only $187 million, or 0.78%, from June 8 to 12, per S3 Partners, and this was only 0.29% of the $64.6 billion in aggregate trading volume for these stocks during the two-day selloff.

When tech rebounds, S3 Partners expects that long investors again will concentrate their buying in the FAANG stocks. For the year to date through June 12, shorting the FAANG stocks has proved to be a losing bet, producing a $3.5 billion mark-to-market loss per S3 Partners' calculations. (For more, see also: Tech Stocks May Be Both Cheap--and Risky.)

Retailers Sold Short

Looking all stocks in the very broad-based S&P 1500 Index, also known as the S&P Composite Index, Bespoke Investment Group identified the 25 most heavily shorted stocks as of May 31. While S3 Partners calculated the market value of short interest, Bespoke looked at short interest strictly in terms of the number of shares, and selected the 25 stocks with largest percentages of short interest relative to their shares of floating stock. These percentages ranged from 31.98% to 50.92%. None of the tech stocks analyzed by S3 Partners were on Bespoke's list.

For the month to date through June 13, only four of the 25 stocks on Bespoke's list were down. In fact, 19 beat the gain on the S&P 1500 over the same period, per Bespoke's calculations. While short interest in high-flying tech stocks is driven by concerns that they are due for a correction, short interest in struggling retailers results from concerns about their long-term viability. Nonetheless, some of the bears have not done well lately.

Department store Dillard's Inc. (DDS) and upscale hamburger chain Shake Shack Inc. (SHAK) top Bespoke's list, both with short interest as a percentage of float that exceeds 50%. In addition to Dillard's, this list also includes seven other brick-and-mortar retailers: general merchandiser Fred's Inc. (FRED), Restoration Hardware parent RH (RH), Big 5 Sporting Goods Corp. (BGFV), department store JC Penney Co.Inc. (JCP), household durable goods lessor Rent-A-Center Inc. (RCII), fashion retailer Stein Mart Inc. (SMRT) and closeout store Big Lots Inc. (BIG). Despite widespread ills in brick-and-mortar retailing, for the month-to-date through June 13, from this group only Fred's and RH dropped in price, per Bespoke. (For more, see also: Sears, J. Crew, Claire's Are Bankruptcy Risks.)