Which stocks are fund managers shorting?
The ETF provider found that 7.1% of Cineworld stock was held short by six investment firms, with New Holland Capital LLC the largest short position with 2.42% of the company’s shares.
The next most shorted UK listed companies were Sainsbury (J) Plc, Tullow Oil Plc, Hammerson Plc and Echo Energy Plc where the respective short positions were 7%, 6.9%, 6.7% and 6.1% respectively.
Other stocks currently being shorted include Trainline, Morrisons and Domino’s Pizza.
What is shorting?
Investors ‘short’ a stock by betting that its share price will fall from its current level. They do this by borrowing a stock, selling the stock, and then buying it back to return it to the lender.
Short sellers are betting that the stock they sell will drop in price. If the stock does drop after selling, the short seller buys it back at a lower price and returns it to the lender. The difference between the sell price and the buy price is the profit.
Short selling is riskier than ‘going long’ on a stock because, theoretically, there is no limit to the amount you could lose. Shorting is an advanced strategy that, ideally, should only be undertaken by experienced traders and investors.
Which fund managers have the most short positions?
GraniteShares’ analysis found that GLG Partners LP had the highest number of short positions on UK listed companies at 21. This was followed by BlackRock (14), Marshall Wace (13), AQR Capital Management (11), and Jupiter (11).
Will Rhind, founder and CEO of GraniteShares, said: “Over the past 12 months, we have seen some of the highest levels of market volatility for years, with continuation of the Covid-19 crisis and investors betting against companies with business models most at risk. The recent activity in Gamestop and other shorted names captures the current trend for democratization of finance with individual investors being able to pursue similar strategies as hedge funds and other professional investors.
“As such, we have seen a significant increase in sophisticated investors looking to short popular UK and US stocks. In the first quarter of this year, $295m was traded through our products, which represents approximately a 40% increase on the $209m traded in the last quarter of last year.”