Short Sellers Love To Hate Retail And Estate Agents

Looking at the companies with the highest proportion of short sellers on their shareholder register can be a good way of seeing what sectors are currently out of favour. It provides insight into which companies stock market investors think are going to see the biggest price falls in the future.

In the world of listed U.K. property, that list is showing a clear trend — investors are shorting retail property owners and estate agents. Here are the top six shorted companies measured by the proportion of their stock currently on loan — a figure seen as a proxy for the amount of stock being shorted — according to IHS Markit.

Intu — 10.5% of stock on loan

Intu was somewhat jilted at the altar when fellow shopping centre REIT Hammerson pulled out of a £3.4B takeover of the company in April. Its shares have dropped 10% since then, with the market unconvinced that the issues that led to it accepting a takeover proposal, like the need for significant capital expenditure in its centres and the general weakness in U.K. retail, will be solved any time soon.

NewRiver — 8.7%

NewRiver is another retail owner with a heavy presence from short sellers. It is in the community retail rather than large mall sector, which is seen as more defensive, but Property Week pointed out that it trades at a much narrower discount to net asset value than other retail owners: 7%, compared to around 33% for Hammerson and 50% for Intu. Short sellers are perhaps anticipating that retail owners will converge.

Purplebricks — 6.7%

Purplebricks is a company where tech meets property, or to put it another way, where hype perhaps meets reality. An online-only business, it says it is the largest estate agent in the U.K. by the amount of property sold, and revenue is growing fast. But like many tech companies it is loss-making, and analysts have questioned the way it recognises revenue from sales and how many of its customers really sell their properties — all of which are claims the company denies. Its shares are valued at more than three times the earnings of traditional rivals like Savills. Those shorting the company clearly take the bearish view.

Countrywide — 6%

Countrywide is a traditional estate agent with one of the largest branch networks in the country, which tried to take its business into the digital age to compete with online portals like Zoopla, Rightmove and Purplebricks. Countrywide has seen revenue decline, which, coupled with its debt, has caused its share price to decline by more than two-thirds in the last year, and led it to announce a £100M rights issue earlier this month.

Primary Health Properties — 4.25%

Anyone who has been shorting Primary Health Properties needs a strong constitution. The company has seen its share price rise by about 10% in the past six months, making it one of the top-performing property stocks this year, and investors like its focus on long-income assets in the demographically supported healthcare sector. Most analysts have it on a buy rating, but some investors are clearly waiting for the price to drop.

Foxtons — 4%

Shares in estate agent Foxtons hit 55p earlier this month, the lowest level since the company was floated by its private equity owners in 2013. The reason is pretty obvious — it has a high exposure to the London residential market, which is slowing every month.