Major investors balanced their positions against retailers over the course of this year and opted instead to position themselves for the share price falls mining companies as well as technology investing companies.
Argos-owner Home Retail, online grocer Ocado, Carpetright, Dixons, Mothercare and Electricals group Darty were among the fifteen most shorted companies in the FTSE All-share at the beginning of the year. Yet, short sellers that borrowed shares on the assumption that the price will decline, cut back their wages over the course of the year according to data.
By the last month of the 4th quarter, there were only three retail businesses in the top fifteen most shares borrowed. WH Smith which was the 2nd most shorted company in the All-share; Carpetright nevertheless saw its short interest decline to 5,65pc from 11.96pc.
Witnessing the demise of the firms such as HMV, people smell fresh meat and think that there will be more problems for the industry were in fact things are actually getting much better which was interestingly very surprising that it got shorted in the very first place.
among the six retailers being most shortened at the beginning of the year, only Carpetright was able to see share price fall. Short-sellers scrambled to cover their positions in order to account some of their gains experienced by the other five most shorted companies.
If there is a large short out there and the company’s results come in line ahead of the expectations then the share price reaction is significantly much more intense than it would be under other alternatives.
Although Home Retail was ranked the most heavily borrowed company in the All-Share at the start of the year it was outranked by Petropavlosk. The Russian group was severely hit by the recession in the price of gold this year.
Earlier this quarter, Petropavlovsk published a new strategic review that took into consideration the lower price of gold, however analysts at RBC Capital Markets were unconvinced stating the company’s sustaining capex and cost expenditures appear to be overly optimistic.
Imaging Technologies’ shares came under attack despite the growing pressure concerning the competition from Cambridge-based rival ARM Holdings. Furthermore, generator supplier Aggreko and construction group Carillion similarly experienced an increase in the proportion of their shares on loan.