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black rock is shorting 16 UK shares, which means it expects its share prices to fall.
The asset management giant, with $10 trillion under its control, employs some of the best financial minds and tools around. That makes it worthwhile to keep a close eye on its movements in the market.
Short selling is how investors profit from falling stock prices. To do so, an investor borrows shares and sells them on the market, hoping to buy them back later, after they’ve fallen.
So which UK stocks does BlackRock expect to crash and burn?
List of the damned?
On March 3, BlackRock held reportable short positions in 16 UK stocks. The Financial Conduct Authority (FCA) requires funds to disclose their short positions if they reach a specific threshold. Specifically, it must be reported when the net short position is equal to or greater than 0.5% of the issued share capital.
| Name of the issuer of shares | Net short position (%) |
| SAINSBURY’S | 2.32 |
| FEVERTREE DRINKS | 1.52 |
| ITM POWER | 1.06 |
| ABRDN | 1.02 |
| Greggs | 0.87 |
| Hargreaves Lansdown | 0.84 |
| NINETY-ONE | 0.80 |
| BROWN GROUP | 0.79 |
| CARNIVAL | 0.78 |
| OCADO GROUP | 0.70 |
| B&M EUROPEAN VALUE RETAIL SA | 0.69 |
| KINGFISHER | 0.67 |
| PHARMA ALLIANCE | 0.63 |
| IBSTOCK | 0.60 |
| OCTOPUS RENEWABLE INFRASTRUCTURE | 0.58 |
| ASTON MARTIN | 0.57 |
BlackRock’s largest short position was in Sainsbury’s (LSE:SBRY), where 2.32% of the company’s issued share capital had been sold short.
The supermarket chain is already trading at a price-earnings (P/E) ratio of just 10.5, compared to from Tesco Much richer rating of 19.6. However, BlackRock could be betting on further contraction in Sainsbury’s earnings as shoppers on an increasingly tight budget look to discounters like Aldi and Lidl for cheaper groceries.
In Sainsbury’s defence, it has cleaned up its balance sheet in the past five years, reducing its debt-to-equity ratio from 40% in 2016 to just 10% this year. Furthermore, his massive cash balances of £917m are more than enough to pay off his debt in one fell swoop.
Despite Sainsbury’s good financial health, analysts seem to expect the company to stagnate in the coming years. Over the next three years, an average of forecasters’ guesses puts the company’s earnings growth on track to rise just 0.1% a year.
BlackRock’s other very short UK stocks include Fever Tree Drinks (a brand of alcohol, tonics and mixers), ITM power (a producer of water electrolyzers for hydrogen power), and open (a global investment company).
Should I buy any of these stocks?
I don’t own any of these stocks, and I don’t plan to buy any of them. However, I’m not necessarily discouraged by the fact that BlackRock is shorting them.
After all, because BlackRock has its fingers in so many pies, it will also in some cases hold these same stocks for a long time.
For example, Sainsbury’s website lists BlackRock as the third largest holder of its shares as of February 1, with almost £400m worth of common shares.
By shorting Sainsbury’s shares, BlackRock is simply protecting its large number of shares against any short-term turmoil for the supermarket chain.
And that’s the key point: I need to consider the time frame of my investment. In the short term, the stocks on this list could fall.
That says nothing about the long term, however. Many of the companies on this list could see sunnier days for them three to five years from now.
However, personally, I would not buy any of the stocks on this list. That’s because, for some of them, I don’t like their business models. For others, I just haven’t done enough research to judge.
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