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Money managers under the microscope

This season’s trendy shorts

July 20, 2009

2008 may have been the year of shorting imperilled financials, but 2009 could be the year of shorting companies with too much debt or those bearing the brunt of the recession.

rtr1skfhNumbers from Dataexplorers show Consumer Discretionary and Industrials are among the sectors with the most stock out on loan in the UK– a good indicator of short-selling activity.

Recent articles on Hedge Hub have shown that short-sellers have been setting their sights on stocks in both sectors, targeting those companies for whom the mountain of debt built up in the good times may prove too much, even with an easing of credit markets.

Alternatively, funds may be wary of companies very exposed to a prolonged economic downturn — retailers and manufacturing.

Information Technology is the UK sector with the most short interest, following a strong rally since March.

Meanwhile, there may yet be question markets over the huge rally in financial stocks — the sector has seen the biggest increase (18 percent) in short positions over the past week.

Sector                                           Pct of market cap on loan

Consumer Discretionary                             2.84

Consumer Staples                                     0.77

Energy                                                      0.47

Financials                                                 1.39

Healthcare                                                1.56

Industrials                                                 2.39

Information Technology                              2.89

Materials                                                  1.02

Telecom services                                       0.77

Utilities                                                    1.02

Source: Dataexplorers

(See also Indebted companies - long or short?Not so good old Yellow Pages and Caught Short)

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