Tagged: Short of the Week
- 25th June 2020 at 10:58 am #20904Stuart FieldhouseParticipant
We have done rather well with our Short of the Week this week – we set up Royal Mail – LSE:RMG – as a short because our research indicated that the firm was going to come up with some worse results. All the tea leaves were pointing in that direction and the big owners of the stock looked like they would sell some of it at least if dividends were delayed.
This was an aggressive short – we needed to catch that drop at about the 180p level before it fell, which it has now done. Royal Mail shares have now found a new level at 168.
We have three main types of short on The Armchair Trader at the moment;
- An aggressive short term short position, like the Royal Mail trade this week. If using CFDs, we don’t like to hold our shorts too long because of the overnight financing fees, so we would be looking to get out of this one now we’ve made our money.
- A more cautious short trade – these are currently not labelled as Short of the Week. A good example was Wirecard last week, where there was still a chance Wirecard might have found its missing €2 billion, although we doubted it. Here we would have had a tight stop in place to protect us. It was a tactical short, but we did not have the same conviction as Royal Mail.
- Long term strategic short: this is where we think the fundamentals inform a gradual decline in an asset price. we will pay closer attention to some of the technical indicators on this type of trade. We are still driven by fundamentals, but we took positions against Carillion and Thomas Cook on this basis. Here we are looking for a share that, 70% of the time is going to close the day down.
As ever with CFD trading or leveraged ETPs, you need to pay close attention to your stops and the amount of exposure you are taking on a trade.
- 10th July 2020 at 4:59 pm #21085Stuart FieldhouseParticipant
Just following up on the above. We called Boohoo as our Short of the Week on the 7th of July. Our central thesis behind this was that the fund management community would not be able to stomach any whiff of sub-minimum wage sweat shops contributing to Boohoo’s bottom line. Boohoo has been staging a fightback since then, as we would expect it to. But we see this now as a war between enthusiastic small investors who see it as a value play, and bigger investors who will not want to have Boohoo in their portfolios a minute longer.
I should stress that this has nothing at all to do with Boohoo’s numbers or the quality of the company – it is down to perception – there is a reputational issue to be answered here. Today we see that in action as Standard Life Aberdeen has dumped almost all its Boohoo stock. We expect other fund managers will be doing the same. Standard Life was Boohoo’s third biggest shareholder.
According to data from Morningstar, 20 funds with ethical guidelines held stock in Boohoo, including, among others, Legal & General funds, Man Group and JP Morgan.
Boohoo shares are currently trading at GBX 281 having rallied a little towards the end of the week, but the SLA announcement is bound to have consequences.
- You must be logged in to reply to this topic.