Why are the most popular also the least popular?

Tesla is the most shorted US stock of the past decade in dollar terms, while Alibaba probably is the most shorted stock in the history of the stock market. The biggest US shorts are surprisingly all large and popular companies. According to Markit, the top ten shorted US companies are Tesla ($13bn), Apple (over $8bn), Amazon (over $7bn), Netflix (over $5bn), Microsoft (around $5bn), Facebook (around $5bn), Microchip Technology (just under $5bn), Intel (over $4bn), Visa (around $4bn) and Walt Disney (over $3bn). Besides Apple, the first trillion-dollar stock, Faangs are all listed in this top-ten list, except Google; Visa has been a popular stock for many investors including institutional investors. It seems that the most popular stocks are also the least popular stocks in the market. Why does this happen? There are several explanations for this.

Firstly, these famous companies generally have very high market values, so a small proportion of the shares can be valued higher than a similar proportion of a cheaper stock. Secondly, the attention affect does not attract the short side, but also attract the short side. Thirdly, since these popular stocks are generally evaluated biased towards the positive side, the valuations of the stocks are more likely to be biased towards the upper boundary of the valuations. This creates an opportunity for the short side, as the potential gains are greater than the potential losses. Fourthly, people tend to believe after a peak, a company will decline. These companies are very massive, leading to people believe they are at their peak; therefore, some investors think their growth story has ended and they are more likely to enter a decline period (like General Motor), thus shorting these massive companies.

To conclude, we should not be surprised to see that the most popular stocks are also the least popular ones.