JPMorgan is short-selling 14 UK stocks, meaning it expects their share prices to drop. Given the financial services behemoth has 12,000 staff based in London, not to mention high-tech software unavailable to retail investors like me, I’m inclined to take its bets seriously.
Short-selling occurs when an investor borrows shares and sells them on the market, with the aim of buying them back later for less. In essence, short-selling is how prescient investors profit from stock prices falling. Short-sellers will target shares in companies that they believe are heading towards hard times.
JPMorgan’s hitlist
The Financial Conduct Authority (FCA) requires that funds disclose their short positions if they surpass a given threshold. Specifically, if an investor’s net short position is equal to or greater than 0.5% of issued share capital, they have to report it.
On 6 February, JPMorgan held reportable short positions in 14 UK stocks. The biggest short position was in FD Technologies, where 1.1% of the company’s issued share capital had been sold short.
FD Technologies provides B2B data analytics services, with 3,000 staff spread across 14 locations in the Americas, Europe, and Asia. The company’s trailing price-to-earnings (P/E) ratio is certainly high at 44. However, with revenue soaring by 24% in FY22, FD Technologies has given investors good reason to trade it at growth-stock valuations.
Still, JPMorgan’s 2023 Business Leaders Outlook report shows 69% of UK executives surveyed believe a recession is likely this year. In such an environment, FD Technologies could see demand for its data-driven consultancy services shrivel up.
| Name of share issuer | Net short position (%) |
| FD TECHNOLOGIES | 1.1 |
| PENNON GROUP | 0.77 |
| MOONPIG GROUP | 0.75 |
| CURRYS | 0.72 |
| ASCENTIAL | 0.69 |
| AUCTION TECHNOLOGY GROUP | 0.62 |
| HALFORDS GROUP | 0.61 |
| MARLOWE | 0.61 |
| IQE | 0.6 |
| HELIOS TOWERS | 0.6 |
| GB GROUP | 0.6 |
| WETHERSPOON (J.D.) | 0.57 |
| WOOD GROUP (JOHN) | 0.56 |
| FEVERTREE DRINKS | 0.52 |
JPMorgan’s other heavily shorted UK stocks include utility company (and the owner of South West Water) Pennon Group, online personalised gift card store Moonpig Group, electricals retailer Currys, and B2B media company Ascential.
Should I buy any of these shorted stocks?
I don’t currently own any of these shorted companies, and I don’t plan to buy any of them.
Of course, JPMorgan doesn’t have a crystal ball. It’s very possible that some of the stocks on its short-selling list will go up in price. The company would then face a stinging loss on its trade.
Looking at the dates when it opened its short positions, I was able to find out its hit-to-miss ratio at the date of writing.
When pigs fly
With all of the resources JPMorgan has at its fingertips, I was surprised to see only three out of its 14 shorted UK stocks have declined in price since the position was opened. Those are Moonpig, which has crashed by 30% since mid-November; Wood Group, which has dropped by 2.9%; and Pennon, which has inched down by 0.16%.
That’s likely because JPMorgan was wrong-footed by the rally in UK stocks over the previous months. Since November last year, the FTSE 350 has rallied by 10%.
| Name of share issuer | Position date | % price change since short position began |
| MOONPIG GROUP | 14 Nov 2022 | -29.62% |
| WOOD GROUP (JOHN) | 30 Jan 2023 | -2.89% |
| PENNON GROUP | 13 Dec 2022 | -0.16% |
| HALFORDS GROUP | 30 Jan 2023 | 0.29% |
| WETHERSPOON (J.D.) | 15 Nov 2022 | 0.65% |
| AUCTION TECHNOLOGY GROUP | 15 Dec 2022 | 1.08% |
| FEVERTREE DRINKS | 30 Jan 2023 | 1.28% |
| IQE | 16 Jan 2023 | 3.32% |
| HELIOS TOWERS | 23 Dec 2022 | 3.94% |
| GB GROUP | 1 Dec 2022 | 4.33% |
| CURRYS | 14 Dec 2022 | 10.87% |
| FD Technologies | 23 Jan 2023 | 18.10% |
| MARLOWE | 20 Dec 2022 | 20.48% |
| ASCENTIAL | 8 Dec 2022 | 32.04% |
So does that mean I’m mad to ignore the other 11 stocks? I don’t think so. While a rising tide tends to lift all boats, a company’s fundamentals have a habit of catching up with its share price. And although things look rough for JPMorgan right now, it may still end up making a profit on many of these short trades if it holds for long enough.
For that reason, I’m going to be careful to do extra due diligence before buying any of the stocks on this list.
