Britain’s ten most-hated shares – w/e 12 August

These are the UK’s ten most unpopular firms, based on the percentage of the company’s stock being shorted (also known as “short interest”).

What is short selling?

Short-sellers target struggling companies and sell their stocks short with the aim of profiting from falling prices. Short sellers borrow the shares, sell them, then hope to buy them at a lower price in the future and pocket the profit. But whether a profit is made or not, the short seller is still obliged to return the borrowed shares to the broker at some point in the future.

As a result, short selling is far riskier than “going long”, as it relies on successfully timing the market, and carries the theoretical risk of unlimited losses (a share price can’t fall below zero, but there is no ceiling on how high it can rise).

The list is worth paying attention to as it highlights which company share prices are expected to fall (which can be a red flag for potential “long” investors), and which may rise on unexpected positive news due to short-sellers being forced out of their positions in what’s known as a “short squeeze”.

Source: FCA's daily short positions report (Data as of 15 August 2022)

The top ten holdings are based on data sourced from the Financial Conduct Authority’s daily short positions report as of 15 August. 

As equities have rallied over the past couple of weeks, hedge funds have pared back their bets against individual companies. For example, bets against Kingfisher, currently the most-hated stock in the UK, have declined from 9.1% of the firm’s outstanding shares to 7.7% as of 15 August. Meanwhile, bets against Curry’s have slumped from a 10-year high of 6.4% back to 4.9%. 

Shopping centre owner Hammerson has been one of the most interesting single stock stories of the year. Towards the end of September 2020 the percentage of the company’s shares out on loan to short sellers hit 26.5% as the group struggled to refinance its debts in the middle of the coronavirus pandemic. Management stabilised the ship and bets against the company have dropped to less than 5% of shares outstanding. 

Short-sellers have retreated as the firm’s fundamental performance has dramatically improved over the past 12 months. In the first half of 2022, Hammerson reported a 154% surge in interim earnings to £51 million. Stronger like-for-like gross and net rental income (up 16% and 48% respectively) as well as a 25% drop in net finance costs, helped the company’s bottom line. 

Hammerson’s fundamental performance has recovered as customers have returned to its shopping centres. At the end of the second quarter centre footfall was 90% of 2019 levels and rent collection had returned to 94%. Retailers are also signing up for new space with £10.5m of leasing deals concluded in the period, with headline rates up 31%. 

With the business back on firmer footing, management can concentrate on unlocking value from the property portfolio. The value of the portfolio grew 2.1% during the first half while Hammerson also completed £194 million of disposals to firm up the state of its balance sheet. It’s reinvesting some of this capital back into the portfolio’s development pipeline. It reduced net debt by 6% during the period. 

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