- Ocado still the number one short
- Retailers in general unloved
- Energy services stocks drilled
Short-selling, or borrowing shares to sell in the hope of buying them back at a lower price, is not something most retail investors have the nerve or the skill-set to pull off as it requires a certain mindset and a willingness to tolerate heavy losses on occasion until your bets come right.
For the pros, however, this has been a good year – as Barry Norris, manager of the VT Argonaut Absolute Return Fund (B79NKW0), has shown – and for those who singled out UK energy services and retailers there have been rich pickings.
OCADO STILL THE UK’S MOST UNLOVED STOCK
The last time we looked, which admittedly was some time ago, grocery delivery firm and warehouse technology provider Ocado (OCDO) was the most heavily-shorted UK company, and it remains the go-to stock for hedge funds today according to data from the shorttracker.co.uk website and ETF provider GraniteShares.
Even though its retail operation – which it operates in conjunction with Marks & Spencer (MKS), one of the most-loved stocks in the market, ironically – is doing very nicely, its software business has suffered several setbacks.
Not only have the shares fallen 60% so far this year, leading to demotion from the FTSE 100, but as we have demonstrated previously it is far and away the most volatile large-cap stock in the market, often moving three or four times as much as the benchmark on any given day.
Other retailers to feature on the most-shorted list are convenience-food seller Domino’s Pizza (DOM), DIY store operator Kingfisher (KGF) and fashion house Burberry (BRBY), which lost its place in the FTSE 100 not long after Ocado and is down over 30% this year.
ENERGY SERVICES UNDER THE COSH
The other major cluster of stocks on the most-shorted list consists of energy and energy services businesses, with over 5% of the shares in both Petrofac (PFC) and Wood Group (WG.) on loan to hedge funds.
Again, the short-sellers have reaped handsome rewards with Petrofac shares down 69% and Wood Group shares down 61% this year.
Further down the list is Diversified Energy (DEC), where the short-sellers have had rather less success as the shares are more or less flat since the start of 2024.
The rest of the top 10 table consists of semiconductor company Alphawave IP (AWE), fund management group abrdn (ABDN) and merchant bank Close Brothers (CBG), which has found itself on the wrong end of a regulatory probe into motor vehicle finance.
