Financial giant BlackRock has set its sights on four FTSE 100 shares, expecting their prices to fall.
With a staggering $10 trn in managed assets and a team of top-tier financial experts, the firm’s market movements are closely watched by investors. I like to periodically check which UK stocks are being shorted by big-money managers like those at BlackRock, because it could be a sign of trouble to come. If a stock I own is being shorted by market movers, it could prompt me to re-visit my thesis and check whether there are any red flags I’ve missed.
In the investing world, short-selling allows traders to profit from declining stock values. The strategy involves borrowing shares, selling them, and planning to buy them back at a cheaper price.
Should you invest £1,000 in Petra Diamonds Limited right now?
When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Petra Diamonds Limited made the list?
Targets for a tumble?
As of 2 October, the Financial Conduct Authority (FCA) revealed that BlackRock had to disclose its short positions in 15 UK companies.
This is a regulatory requirement for any net short position that equals or surpasses 0.5% of a company’s issued share capital.
Of these 15, four of them feature in the FTSE 100.
| Name of share issuer (FTSE 100 companies) | Net short position (%) |
| Hargreaves Lansdown | 1.5 |
| Ocado Group | 1.1 |
| Kingfisher | 0.6 |
| BT Group | 0.5 |
BlackRock’s biggest short position among the FTSE 100 incumbents is Hargreaves Lansdown (LSE:HL), where 1.5% of the company’s issued share capital had been sold short.
This might seem surprising, especially since Hargreaves Lansdown has recently been in the news for all the right reasons.
Bullish meets bearish
In mid-September, the investment platform reported a pre-tax half-year profit of £402.7m, significantly exceeding the consensus estimate of £379.4m. Meanwhile, revenues rose to £735.1m, well above the expected £717.6m, and the firm declared a final dividend of 41.5p a share, up from last year’s 39.7p.
However, BlackRock’s broader market outlook is bearish, anticipating economic stagnation and possibly even a recession in the US.
Hargreaves Lansdown’s CEO, Dan Olley, also cautioned that the uncertain economic climate could impact investor confidence.
BlackRock’s short position suggests it expects Hargreaves Lansdown to struggle in this volatile environment.
Am I buying?
So, what’s my take? While it’s uncertain whether the stock market rally of 2023 will extend into 2024, Hargreaves Lansdown has other, more pressing concerns.
That is because the way people invest has changed. A huge range of apps with zero trading fees are now available for the smartphone generation at the swipe of a thumb.
This is very bad news for Hargreaves Lansdown, a platform that still charges a trading fee ranging from £5.95 to £11.95.
In its defence, its fee-free rivals like Trading 212 and Freetrade don’t offer anywhere close to the same variety of shares, funds, and ETFs. But I don’t see any reason to believe that will always be the case.
As for the other three FTSE 100 companies that BlackRock is shorting — Ocado Group, Kingfisher, and BT — I can’t comment as I’m not well-versed in their particulars.
But I wouldn’t necessarily write them off just because BlackRock is shorting them.
As a Foolish investor, I look to hold high-quality companies for the long term. So, even if they do see short-term share-price drops of the kind BlackRock is hoping for, I could happily ride that out, provided I had a solid investment thesis.
