Every day the FCA publishes adaily short positions report, which lists the most heavily shorted, or as I like to call them, the most disliked stocks traded in London.
Of course, this daily report is only designed for information purposes and is not supposed to be an indicator of past, present or future performance. Still, its interesting to see which companies investors are betting against the most.
Sainsburys(LSE: SBRY)tops the list as it has done for some time now. According to the FCAs latest report, 11.6% of the companys float is short.
Monitise(LSE: MONI) is up next and the company has 7.3% of its float out on loan to short sellers. Unsurprisingly,Morrisons(LSE: MRW) holds third place with 7% of the companys float short and engineer,AMEC(LSE: AMEC) comes next with 6.9% of its float short. Finally,Nanoco(LSE: NANO), which has 6.7% of its float short.
But even though some investors are betting against these companies, there are still plenty of reasons to stay bullish.
Of course, both Sainsburys and Morrisons are some of the markets most shorted companies due to their dismal trading performance over the past few quarters. Nevertheless, asI wrote earlier this week,the UKs supermarket sector as a whole is now staging a comeback and some believe that the worst is now over.
For example, both Sainsburys and Morrisons have identified the fact that theyve fallen out of favour with core customers and are now seeking to remedy this. Sainsburys is launching its own joint venture with discounter, Netto. Meanwhile, Morrisons has launched a loyalty card programme and slashed prices across the board. Whats more, at present levelsSainsburys and Morrisonslook too cheap to ignore.
High risk, high reward
Sainsburys and Morrisons look undervalued at present levels but its not as easy to put a value on Nanoco and Monitise as neither company currently makes a profit.
And it seems as if this is way investors are betting against the two early-stage companies. However, over time, the fortunes of Monitise and Nanoco could turn around.
Indeed, Monitise has attracted plenty of attention recently. The company has signed a joint venture with tech giantIBMand has inked a number of contracts with major financial institutions over the past year. Unfortunately, this good news has been mitigated by the fact that the company is still struggling to turn a profit and has missed many targets for growth.
Nevertheless, Monitises outlook could change dramatically as the company starts its work with. IBM.
Manufacturer ofquantum dots, Nanoco has also missed profit forecasts this year. Still, the company has worked hard to sign contracts for screen developmentwith a number of display makers from South Korea, Japan, United States, China and Taiwan for televisions, monitors and tablets. So, things could be about to change for the company.
Investors seem to be betting against AMECdue to the companys high valuation and the falling price of oil. You see, with the price of oil collapsing, many oil development projects could be put on hold, as costs begin to outweigh the benefits. This will impact Amecs long-term growth.
At present levels the company is trading at a forward P/E of 13.2, which is not overly demanding. However, considering the fact that the companys earnings per share are expected to fall around 10% and the companys outlook could be dented by a falling oil price, investors are unwilling to pay a premium valuation.
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Rupert Hargreaves owns shares of Morrisons. The Motley Fool UK owns shares of Monitise. We Fools don’t all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.