High short interest stocks: the most shorted stocks this week

The most shorted stocks give us vital insights into not only the sentiment toward individual companies but the broader market too. Track the top 10 most shorted stocks this week and find your opportunity.

Downtrend 2

Shorted stocks list: this week’s most shorted stocks

  1. Tesla
  2. Hellofresh
  3. Anglo American
  4. Eurofins Scientific
  5. Ambu
  6. Lloyds Banking Group
  7. Pershing Square Holdings (GBP)
  8. AstraZeneca (LSE)
  9. Barratt Developments
  10. Standard Chartered (LSE)

 

Tesla has remained the most-shorted stock among UK clients. Tesla shares have continued to gain ground since its strong set of quarterly results earlier this week, underpinned by record deliveries in a tough environment plagued by the chip shortage. The stock is now within touching distance of its all-time high before the opening bell today but the debate over its valuation continues. Brokers believe Tesla, which is now the most valuable carmaker in the world, is around 17% overvalued following the recent rally. In fact, the company is worth more than Daimler, Toyota, Ford, BMW, Honda and General Motors combined, with many investors still applying a huge premium to Tesla thanks to its tech-led business and first-mover advantage in the electric vehicle space.

Hellofresh shares have lost over 2% in value this week and remains a favourite among short sellers. Brokers are still bullish on the stock and see over 12% upside from the current target price of EUR89.30. The stock has trebled since the start of the pandemic as lockdown caused a boom in demand for at-home meals, casting doubt on its prospects as restrictions ease and people spend less at home and more going out.

Anglo American said it was on course to meet production targets across the board yesterday after reporting a 15% rise in iron ore output and a 6% decline in copper output in the latest quarter. Anglo American shares have shed over 5.6% in the past week, tracking the fall in commodity prices.

Eurofins Scientific shares have fallen over 2% this week, marking a 17% drop over the past month. The company raised its revenue target for the year yesterday and left its earnings and cashflow targets unchanged, but warned the evolution of Covid-19 and the unwinding of government support tied to the pandemic means there is still some uncertainty going forward. Analysts at Jefferies said markets were disappointed by earnings guidance being left unchanged as it was below expectations.

Ambu shares have rallied over 7% this week but is still trailing over 26% year-to-date. Reports broke on Monday that Marshall Wace Asia now holds a short position of 0.5% in Ambu shares, following on news earlier this month that Blackrock Investment Management has built a short position of 0.94%.

Lloyds Banking Group shares are down 1.5% sine the start of the week. The bank is scheduled to release third quarter earnings next Thursday, following positive numbers out from Barclays this week. Lloyds is in play amid the expected rise in interest rates by the Bank of England over the coming months. Higher rates would boost net interest income, lifting profitability. Lloyds is set to be one of the biggest benefactors from higher interest rates given its focus on lending & mortgages. Still, it is popular among traders that use Lloyds as a bellwether for the wider UK economy.

Short sellers in Pershing Square Holdings will not welcome the fact shares have risen 3.4% this week and are currently trading at a new all-time high.

AstraZeneca shares are also in touching distance of the all-time highs we saw back in July, having gained 3.3% this week. Some believe there is a shorting opportunity as it trails in the coronavirus vaccine race, but brokers remain extremely bullish on the stock and see 8.8% potential upside from the current share price.

Barratt Developments shares have plunged over 6% this week and the housebuilder is down 17.5% in the last six months.

Standard Chartered was in the news this week after it was hit by a fine in India for failing to comply with rules and was one of 14 banks mandated by the Chinese government for a proposed offering of dollar-denominated unsecured bonds.

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Most short-sold stocks explained

The most shorted stocks are those that have been sold the most over a period of time, in this case a week.

Traditionally, in order to short a stock, you’d have to borrow the asset from a third party before you could sell it on the market. You’d do so in the belief that the market price would fall, and you could buy it back at a lower price, pocketing the difference before you return the shares to your lender. 

Now, thanks to electronic trading and derivatives, shorting a stock is just as straightforward as buying it. You just click ‘sell’ in your platform rather than ‘buy’. This is because you’ll never take ownership of the shares, you’re just speculating that it will fall in price.

Heavily shorted stocks create a bear market, where sellers enter and put downward pressure on the asset’s price. Buyers are forced to close their positions before they lose too much money, causing the market price to just fall lower and lower.

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