Short trading in supermarket shares is picking up as worries mount over the ability of the listed grocers to cope with rising food prices.
Ocado, which announced solid first-quarter retail sales growth of 13.1% this week, remains the second most-shorted stock on the FTSE according to publicly disclosed information relating to stock on loan (a proxy for short-selling). Levels of short trading in Ocado stock are stubbornly refusing to decline as concerns over the threat of Amazon persist.
In recent weeks, two more big bets have been taken against the stock.
Within the past month, both BlackRock and WorldQuant have increased short positions against Ocado’s entire issued stock by 0.25% and 0.24% respectively, bets worth nearly £4m.
They join Discovery Capital Management and GMT Capital in holding large positions against Ocado, with Discovery holding a huge 4.94% of Ocado (worth £78m) and GMT 2.98% (worth £47m).
Of the 13 investors holding short positions, of more than 0.5% of Ocado’s stock, nine have more recently increased their shorting and only four decreased. According to data from Markit, at the end of February Ocado hit 20% of stock on loan - a level it has not hit on a sustained basis since the summer of 2016.
Sainsbury’s and Morrisons also remain targets for short sellers despite improving performances. Short-selling of both retailers has fallen since the summer, but several hedge funds increased positions against the pair recently.
Markit data shows Sainsbury’s stock on loan is creeping up again to 11.7% - it was at 10.4% in the first week of January. Six of the eight Sainsbury’s shorters with positions of 0.5% or over have more recently increased their positions than reduced them.
Morrisons stock on loan is also beginning to rise again after a long period of decline, edging back up to 14% on loan on 1 March before easing back to 13.4% currently.
Despite the downwards trend in overall shorting of Morrisons - it was as high as 20.4% in September - it remains the FTSE’s third most-shorted stock and nine of 13 short sellers have most recently increased their short positions.
Tesco has experienced a lower proportion of shorting recently, with stock on loan only touching 7% at its peak in 2016, said Markit. But shorting at Tesco has increased noticeably since the start of the year, now standing at 6% against 3.8% at the start of 2016.
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