Top 10 most shorted stocks in the UK
Many traders seek out struggling companies and short their stocks in the hopes of making a profit if share prices fall. Here, we unpack the most shorted stocks in the UK and explain how you can trade them.
How to trade the UK’s most shorted stocks
To trade any of the stocks on the ‘UK’s most shorted stocks’ list, you can open a position using a spread bet or contract for difference (CFD). When you go short, you’re speculating that the price of an asset will go down – and if you’re right, you’ll make a profit. If the share price rises, the market is moving against you, which will result in a loss.
If you want to short-sell, you can either use derivative products such as spread bets and CFDs or borrow the stock from a share dealing broker. With us, you’ll use these financial derivatives with leverage – which means that you’ll only need a small deposit, known as margin, to gain full exposure. While your initial outlay is decreased significantly, both your potential profits and possible losses are magnified to the full value of your trade.
That’s why it’s important to manage your risk properly. Further, using derivative products mean you don’t own the underlying shares – you’re simply speculating on their price movements. If you borrow the shares, you’ll aim to sell them, then buy them back at a lower price in the hopes of making a profit. Whether you make the profit or not, you’ll have an obligation to return the borrowed shares to the broker.
Most shorted stocks in the UK
- Boohoo group (8.22% short)
- Kingfisher (7.2% short)
- ASOS (6% short)
- Hargreaves Lansdown (5.7% short)
- Majestic Wines (5.2% short)
- Fever-Tree Drinks (5.1% short)
- Currys (4.8% short)
- Rentokil Initial (4.8% short)
- Hammerson (4.7% short)
- Ashmore Group (4.5% short)
The following shares were chosen as the 10 most shorted stocks in the UK by descending order of their percentage weighting for being sold on the market.1 Note that the most shorted stocks in the UK change daily due to normal market fluctuations. For the most recent data, you can visit the FCA short tracker.2
Boohoo group (8.22% short)
A key player in the online fashion market is Boohoo group. Starting in 2006, the firm has grown rapidly in the fast-fashion space. Although active customers increased by 43% to 20 million in recent times, the company’s shares have fallen by around 85% in the past financial year.3
The fall was probably because fast fashion is a niche where trendy clothing, inspired by a growing celebrity culture, is sold affordably in rapid time to meet customer demand. Other reasons include the scrutiny on low wages paid to fast fashion workers and the company’s level of carbon emission and waste in today’s eco-conscious landscape sustainability is increasingly receiving attention.4
Kingfisher (7.2% short)
Kingfisher is a British multinational retailing firm, with headquarters in London. Despite its over 1 300 stores in approximately nine countries, and incorporating brands such as B&Q, Castorama, Brico Dépôt and Screwfix – Kingfisher’s share price continues to drop, making it one of the UK’s most shorted stocks.3
Market sentiment is that investor confidence will only be boosted when trade patterns completely normalise post-Covid-19. Further, the company’s retail profit for the first half of the 2022 financial year ended June 2022 decreased by 27.6%, due to the current high cost of living.3
ASOS (6% short)
ASOS made the change from London’s junior Alternative Investment Market (AIM) market to the London Stock Exchange (LSE) in February this year, with a view to accessing a broader group of global institutional shareholder. However, the move immediately saw the company’s share price fall by 3.1% on its debut listing on the LSE.5
This fashion and cosmetics focused e-commerce player that predominantly targets the youth segment, generates at least 42% of its revenue from the UK. An additional 20% of revenue is derived from special-size categories, in this market and others, where the competition is generally limited.5
While the decision to subject itself to the main market’s stricter reporting protocols may have come about as a way to reassure shareholders and stakeholders alike of a set of increasingly stringent ESG standards for ASOS, the firm’s shares have been on a downward trend since July of this year.
The decrease has been due to supply chain pressures, continued economic uncertainty, and a profit warning when the ASOS CEO stepped down after six high-pressure years.
Hargreaves Lansdown (5.7% short)
Shares in the Hargreaves Lansdown (HL) investment platform have been on a downwards trend since mid-2021, revealing trying times as many companies try to reach normalised trading levels post-Covid-19 pandemic. The company had a record-trading year up to mid-2021, but a sharp rise in inflation hassled to a shift in the playing field.
However, HL chief executive officer (CEO) Chris Hill said he expected the current economic and geopolitical turbulence slowing activity across the entire wealth management sector to be temporary since real income hardly declines for a protracted period.
Majestic Wines (t/a Naked Wines) (5.2% short)
Naked Wines, a Norwich-based online retailer that connects shoppers with independent wine makers, was bought in 2015 by Majestic Wines. While Naked Wines benefited from a mass increase in sales during Covid-19 lockdowns, a sobering outlook has followed to the extent that the firm lost nearly 40% of its market value towards the end of June 2022.
At present, weak demand due to inflationary hikes and the risk of expensive order cancellations are forcing the retailer to consider discounting stock in their warehouse into cash. Margins are also being squeezed by a crippling increase in storage, transportation and logistics costs.
Fevertree Drinks (5.1% short)
In its financial results for the first half of fiscal year 2022 (FY22), Fevertree Drinks reported a 14% growth in revenue with a strong consumer demand, mainly in the US and Southern Europe, post-Covid-19 pandemic recovery.6
However, the current macroeconomic factors seen in the rise in inflation have increased the cost of logistics, having a negative impact on the margin. The rising cost of glass and freight transportation have resulted in the increasing the cost of the beverages as these charges are transferred to the consumers.6
To cut down on freight costs, the group reported that it would expand and scale up local production and ensure operations were efficient. The group would also use economies of scale to increase their volume growth in the future.6
Currys (4.8% short)
Formerly Dixon Carphone, Currys, is now one of the most shorted stocks in the UK as the rising inflation continues to limit customer spending. The share price of this retailer declined by 15.8% over the past 12 months, with stocks spiralling down some 68.4% over a five-year period.7
There’s no saying how much longer short sellers will continue to bet against this UK retailer, but the pound’s lower purchasing power is dramatically leading to fewer sales, continuing the downward trend.7
Rentokil Initial (4.8% short)
Pest-control company Rentokil Initial has moved into the list of most shorted stocks in recent months. The reason could be that short sellers have been speculating that Rentokil’s potential acquisition of US rival Terminix, which was first announced in December 2021, is likely to fall through.3
However, the third quarter (Q3) results for FY22 seem to indicate otherwise, with the group CEO Andy Ransom confirming that the Terminix transaction had been completed. The former Terminix CEO Brett Ponton has been appointed CEO of the combined group’s North America region.8
The group said its financials from the mergers and acquisitions pipeline stood at about £250 million for FY22, but these were excluding Terminix. Its Q3 for FY22 results state an 11.7% increase in ongoing group revenue, excluding disinfection services.8
Hammerson (4.7% short)
Retail centre owner Hammerson was heavily affected by the Covid-19 pandemic as fewer shoppers set foot in physical stores. The many stores that couldn’t afford their rent also affected Hammerson’s income. This is reflected in the business’s share price movements – but shares had been declining long before lockdown, just like most other stocks on this list.
Reasons include the lower perceived value of retail property and widening losses for the business. The outlook for Hammerson will likely depend on what the future looks like for bricks-and-mortar retail operations, with the company’s CEO, Rita-Rose Gagné, commenting that Hammerson would be able to strengthen its cash balance by selling various non-essential assets as a matter of urgency.
Ashmore Group (4.5% short)
Investment management firm, Ashmore Group, has struggled to reverse the fall in its share price over 2022 and its stock is now trading at a 13-year low. Ashmore bet against the likelihood of Russia invading Ukraine early in 2022. This bold stance resulted in a rapid 80% decline in the value of Ashmore’s almost €143 million stake in Russian government debt.
Short-selling stock examples
Let’s look at a few short-selling examples, to see how you can use this strategy to try and profit from a company’s falling share price.
Shorting stock with spread bets example
If you choose spread betting, you’re simply betting on the direction in which the market will move. Say XYZ shares are trading at $68.5, with a sell price of $68.45 and a buy price of $68.55. You think the XYZ share price will fall, so you go short at $50 per point of movement at the sell price of $68.45.
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If the share price goes down
Let’s say the market moves in your favour after two weeks, and the share price drops to $60.5 with a sell price of $60.45 and a buy price of $60.55. You decide to close your trade, and get $50 for every point the price moved down – which means you’d have made $395 in profit ([$68.45 – $60.55] x $50).
With spread betting, you won’t have to pay any tax on your profits, or commission to open the position. However, you’ll have to pay funding charges if you keep your position open overnight.
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If the share price goes up
If the XYZ share price moves against you – in other words, it goes up – you’ll lose $50 for every point the market moves against you. Assume the new share price is $71.5 after two weeks, with a sell price of $71.45 and a buy price of $71.55. If you close the trade at the new buy price, you’ll incur a loss of $155 ([$68.45 - $71.55] x $50), plus any overnight funding charges.
Shorting stock with CFDs example
If you choose CFD trading, you’ll be exchanging the difference in price of the stock from when the position is opened to when it is closed. Let’s say the underlying market price of XYZ shares is $68.5 a share, with a sell price of $68.45 and a buy price of $68.55. You decide to short sell 100 shares.
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If the share price goes down
If the share price moves in your favour after two weeks and goes down to an underlying price of $60.5, with a sell price of $60.45 and a buy price of $60.55, you’d stand to profit. Suppose you decide it’s time to reverse the trade, so you buy the shares at the new price of $60.55. Your profit on this trade will be calculated as ([$68.45 – $60.55] x 100), which equals $790.
Note that you’ll also need to pay a commission fee, any overnight funding charges, and capital gains tax on your profits.
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If the share price goes up
Let’s assume that the market has moved against you after two weeks and is now trading at $71.5 with a sell price of $71.45 and a buy price of $71.55. You decide to close your position. The calculation of your loss is ([$68.45 – $71.55] x 100), which gives you a loss of $310, in addition to your commission fee, and any overnight charges.
How to use shorting data
You can use shorting data – the details surrounding the most shorted stocks – to identify the companies in which investors have the least confidence. This should be an indication that markets aren’t doing well and share prices might fall – or continue to fall. Ensure you carry out thorough technical and fundamental analysis, including shorting data, before deciding to buy or sell shares.
Footnotes
1 This list was updated according to the data pertinent to 02 September 2022
2 FCA, 2020
3 CMC Markets, 2022
4 The Guardian, 2022
5 The Telegraph, 2022
6 Fevertree Drinks, 2022
7 Trustnet, 2022
8 Rentokil Initial, 2022
This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
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