[ad_1]
Image source: Getty Images
JPMorgan it is short-selling 14 UK stocks, which means it expects share prices to drop. Given that the financial services behemoth has 12,000 staff based in London, not to mention high-tech software that isn’t available to retail investors like me, I tend to take my bets seriously.
Short-selling occurs when investors borrow shares and sell them in the market, with the intention of buying them back later for less. In essence, short-selling is how investors profit from falling stock prices. Short sellers will target stocks in companies they believe are headed for tough times.
JPMorgan’s hit list
The Financial Conduct Authority (FCA) requires funds to declare short positions if they exceed certain thresholds. Specifically, if the investor’s net short position is equal to or greater than 0.5% of the issued share capital, he must report it.
As of February 6, JPMorgan held a reportable short position in 14 UK stocks. The largest short position is in FD technologywhere 1.1% of the company’s issued share capital has been sold short.
FD Technologies provides B2B data analytics services, with 3,000 staff spread across 14 locations in the Americas, Europe, and Asia. The company’s trailing price-to-earnings (P/E) ratio is certainly high at 44. However, with revenue rising 24% in FY22, FD Technologies has given investors a good reason to trade in growth stock valuations.
Still, JPMorgan’s 2023 Business Leaders Outlook report shows 69% of UK executives surveyed believe a recession is likely this year. In such an environment, FD Technologies can see the demand for data-driven consulting services.
| The name of the issuer | Net short position (%) |
| TECHNOLOGY FD | 1.1 |
| THE PENNON GROUP | 0.77 |
| MOONPIG GROUP | 0.75 |
| CURRY | 0.72 |
| ASCENTIAL | 0.69 |
| AUCTION TECHNOLOGY GROUP | 0.62 |
| HALFORDS GROUP | 0.61 |
| MARLOWE | 0.61 |
| IQ | 0.6 |
| THE TOWER OF HELIOS | 0.6 |
| GB GROUP | 0.6 |
| WETHERSPOON (JD) | 0.57 |
| WOOD GROUP (JOHN) | 0.56 |
| FEVERTREE drink | 0.52 |
Other UK stocks shorted by JPMorgan include utilities company (and owner of South West Water) The Pennon Grouppersonal gift card store online The Moonpig groupelectricity retailer Curryand B2B media companies Ascential.
Should I buy this short stock?
I currently do not own these shorted companies, and I do not plan to buy any of them.
Of course, JPMorgan doesn’t have a crystal ball. It is very possible that some stocks on the bestseller list will rise in price. The company will then suffer huge losses in trade.
Looking at the date when the short position was opened, I can see the hit-to-miss ratio on the date of writing.
When pigs fly
With all of JPMorgan’s resources at my fingertips, I was surprised to find that only three of the 14 shorted UK stocks have declined in value since the position was opened. That’s Moonpig, which has crashed 30% since mid-November; Wood Group, which has decreased by 2.9%; and Pennon, which has inched down by 0.16%.
That’s likely because JPMorgan was wrong-footed by the rally in UK stocks over the previous month. Since November last year, the FTSE 350 has rallied by 10%.
| The name of the issuer | Position date | % price change since short position started |
| MOONPIG GROUP | November 14, 2022 | -29.62% |
| WOOD GROUP (JOHN) | January 30, 2023 | -2.89% |
| THE PENNON GROUP | December 13, 2022 | -0.16% |
| HALFORDS GROUP | January 30, 2023 | 0.29% |
| WETHERSPOON (JD) | November 15, 2022 | 0.65% |
| AUCTION TECHNOLOGY GROUP | December 15, 2022 | 1.08% |
| FEVERTREE drink | January 30, 2023 | 1.28% |
| IQ | January 16, 2023 | 3.32% |
| THE TOWER OF HELIOS | December 23, 2022 | 3.94% |
| GB GROUP | December 1, 2022 | 4.33% |
| CURRY | December 14, 2022 | 10.87% |
| FD technology | January 23, 2023 | 18.10% |
| MARLOWE | December 20, 2022 | 20.48% |
| ASCENTIAL | December 8, 2022 | 32.04% |
So does that mean I’m ignoring the other 11 stocks? I don’t think so. While rising tides tend to lift all boats, company fundamentals have a habit of holding up stock prices. And even if things look rough for JPMorgan right now, it could turn a profit on many of those short trades if it lasts.
Therefore, I would be careful to do extra due diligence before buying stocks on this list.
[ad_2]
Source link