Checking out: Are the Burberry short-sellers short-sighted?
Investors are not feeling too hot about trenchcoat-maker Burberry today, with its stock among the most heavily shorted ahead of eagerly anticipated results out tomorrow morning.
According to financial data providers, Markit, around seven per cent of the company's shares were out on loan to those hoping to cash in from a short-term fall in its share price. That level is down from around nine per cent earlier this year as turmoil in China has resulted in shares fluctuating between 1,078p and 1,462p in the first four months of the year.
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"It's clear what our traders think," said Mike Read from app-only investment platform, Pelican. "Shorting Burberry is our most copied trade of the week so far".
However, the short-sellers haven't managed to put too much of a dent in Burberry's shares this week. At 1,141p a pop they are basically unmoved from last week's close of 1,139p.
Panmure Gordon's David Buik said that some of short-sellers were "squeezed out when [the most recent] trading statement was not as bad as expected. However, the share price has continued to drift – more we think on sentiment than short-selling".
Chris Beauchamp of IG, suggested that poor results could already been more than factored into Burberry's share price, saying the price could even be more likely to jump when numbers – expected to reveal a seven per cent drop in profits – come out tomorrow morning.
"Burberry has continued to take a hammering in share price terms, notably underperforming the market since the beginning of March, so I think it might be that the risk actually lies to the upside," he told City A.M.
"Some latecomers to the shorting party could come out with burnt fingers."