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It goes without saying that the Rolls-Royce (LSE:RR) share price has been in great shape for a while. Go back four years and you could have bought shares for just under 40p each in the lockdown-induced haze. Fast forward to when I'm writing this and the price is approaching 530p.
I take my fool's hat off to anyone who has managed to make it through this incredible recovery. I also wonder if there is a chance of another FTSE stock rising from the ashes in a similar way.
Stock price drop!
In an almost complete change of fortune, ocado (LSE: OCDO) have had a very bad last four years. Around the same time Rolls-Royce was on its knees, the online grocery and logistics provider's share price was at a record high thanks to a purple trading streak during the pandemic.
In case you don't know, Ocado's share price is down 86% since those heady days. That's the kind of move we might expect from a penny stock!
Rolls-Royce has fared much better thanks in part to travel demand returning to normal and more planes (running on its engines) in the sky.
By contrast, confidence in Ocado fell as shopping habits returned to normal. More recently, investors have not welcomed news of a slowdown in the rollout of its robot-filled Customer Service Centers to retail customers.
Lost cause?
I think it is a mistake to assume that the price of any share (including Ocado) is doomed to move sideways (or worse) in the future. We just don't know for sure. And neither do those smart people in the City.
In fact, some of the company's most recent updates have been positive. For example, shares soared in September after management raised full-year revenue guidance following a 15.5% rise in its latest quarter as customer numbers grew. The firm's joint venture with Brands and Spencer it is now expected to deliver low double-digit percentage growth. Previously, it was anticipated to be a mid-to-high single-digit percentage.
Furthermore, Rolls-Royce's recovery must surely slow at some point. Its shares are now changing hands with a (very) frothy forward P/E ratio of 30!
Buyer Beware
On the other hand, I remain wary of any £3.2bn business which, according to its finance director, will not post a pre-tax profit for another four or five years.
It seems I'm not alone. Ocado is currently the third most shorted stock in the UK market. Put another way, quite a few traders are betting that stocks will continue to fall.
There is a chance they are wrong and a rush to close their positions would accelerate the stock price. But it is not the most encouraging sign.
For now, there appears to be no interest in Rolls-Royce from short sellers.
I'm not holding my breath
Taking the above into account, I would be surprised if there was a recovery comparable to that observed in the FTSE 100 The actions would take place here. In my view, there are much more promising turnaround candidates lurking elsewhere in the UK stock market. Some of these might even pay dividends while I wait.
Ocado is still not for me.
