Many traders research struggling publicly listed companies and short their stocks as they believe the share price will fall. Here, we assess the most shorted UK stocks and explain the potential reasons for the short positions.
Investors are betting against these five London stocks. Here’s why:
- Ocado (LON: OCDO): There are currently nine different funds cumulatively short some 6% of Ocado’s total share issuance. The British online grocery retailer is currently the most shorted stock in the UK. It has been struggling in recent months due to rising costs, increased competition, and declining demand. Ocado Twitter mentions, which help investors assess rising and falling demand trends, have been subdued for some time.
- Kingfisher (LON: KGF): Six funds are short around 5.3% of Kingfisher’s total share issuance. The B&Q owner has been impacted by poor weather in March, which has affected gardening sales. Meanwhile, the DIY market has been unpredictable due to fewer people moving, while the rising cost of living has resulted in consumers spending less on home improvement, leading to a decline in demand for its products.
- Moonpig (LON: MOON): Five funds are short 4.8% of Moonpig’s shares. The British online greeting card retailer had a rough 2022 as consumers began shopping in stores once again. Its shares are down 36% in the last 12 months but up 29% in 2023. The company said in late March that its trading performance has been resilient, and it remains confident.
- Boohoo (LON: BOO): At the time of writing, five funds, including Citadel, are short 4.8% of Boohoo’s shares. The online fashion retailer has been criticized for its poor working practices and has faced several challenges, including demand waning following the pandemic, supply chain disruptions, and competition from Chinese online retailer Shein. Consumer happiness is currently split 50/50.
- Hammerson (LON: HMSO): The British real estate investment trust (REIT) owns, invests in, manages, and develops retail properties in the UK and Europe. There are currently five funds short 4.6% of Hammerson’s shares. The company has been hit by the decline in footfall to its shopping centres caused by the rise of online shopping.
It’s important to note that elevated short interest is not necessarily a sign that a stock is a bad investment. However, it does tell us that investors are bearish on the stock and believe the price will fall…
If you do go short, be careful of short squeezes!
By Sam Boughedda