Hedge funds were increasing their short positions on Domino's Pizza [LON:DOM] in December, with the fast food stock now jousting with Petrofac to win the prize of the most shorted stock in London.
At the same time the shares of the pizza delivery specialist have continued their decline, with Domino's Pizza stock giving up most of the gains it achieved in the last quarter of the year.
Domino's shares were seeking a plateau of around 300p at time of writing. Much of the recent selling followed the company's announcement on 9 December which reported total orders up 5.4% in the first nine weeks of Q4 and like for like sales up 2.7%. However Domino's said that the recent UK budget has significantly increased the cost of labour both for the group itself and its franchise partners "who are particularly impacted."
Management of the pizza delivery group said the overall impact for the group would be £3m per annum.
Hedge funds go short on Domino's Pizza
Hedge funds were quick to respond to the news and we saw a large increase in the short positions on the stock in late December. Larger hedge fund firms like GLG Partners and Marshall Wace increased their positions while regulatory umbrella Mirabella Financial Services, which covers smaller hedge funds, also reported increasing short positions.
Domino's Pizza has previously been a profitable target for short side traders which made money from the stock in 2017-18 when it was one of the popular shorts in the City of London.
The question is, are they right to expect further declines in the Domino's share price? We ran the shares through our AI stock analysis software to see how they stacked up.
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