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Last updated: July 3, 2014 7:33 pm
Once again, the short sellers are being burnt by Ocado.
A short squeeze helped pull Ocado to a six-month high on Thursday, up 9 per cent to 440p, on word that post-results management meetings had gone well. Shares on loan had jumped going into figures this week amid expectations that sales guidance would be cut.
Instead, investors were said to have been encouraged by Ocado’s new warehouse model, which promises to be quicker and much less costly to build. The group’s new distribution point in Hampshire has therefore been seen as a template for long-promised international licencing deals, which analysts now expect before the end of next year.
Ocado’s shares on loan this week rose to a one-year high of 7.8 per cent of its free float, up from less than 1 per cent at the start of the year, Markit data show. The last spike in Ocado’s short interest was in late 2012, when expectations of a cash call meant nearly a quarter of its free float was loaned out. The shares then rallied eightfold.
A third day of gains in the wider market lifted the FTSE 100 by 48.84 points or 0.7 per cent to 6,865.21.
Leading the blue-chip risers, Sports Direct gained 5.6 per cent to 769p after Wednesday’s shareholder vote, in which the retailer avoided a third rebellion over the bonus scheme offered to owner Mike Ashley.
The resolution “should allow for Sports Direct and its institutional shareholders to now move back to the common ground of operational performance”, said Jefferies. “Strong full-year results on July 17 should provide a reminder of the group’s attractions, with the nascent international footprint an obvious driver for multiples expansion.”
Man Group rose 6.1 per cent to 113.8p as traders picked up on the recent rebound of its trend-following AHL funds, which year-to-date have jumped about 9 per cent in old form and 13.5 per cent for its new-formula Evolution funds.
AstraZeneca edged up 0.1 per cent to £44.23 even after JPMorgan Cazenove, an adviser to Pfizer for its unsuccessful takeover approach, restarted coverage with a £37 “fundamental” valuation.
JPMorgan saw a 35 per cent chance of Pfizer coming back in August, once a Takeover Panel restriction lapses. “In the more likely scenario that an acquisition doesn’t occur, we expect a return toward fundamentals by late September,” it said.
Balfour Beatty dropped 4.5 per cent to 222.5p on its fourth profit warning in two years, with the infrastructure group blaming problem engineering services contracts mostly in London. The stock bounced off a 193.8p session low as fears of a dividend cut were countered by speculation that Balfour’s ongoing auction of its Parsons Brinckerhoff professional services division might result in a bid for the entire group.
Aveva, the design software maker rumoured to be a takeover target, edged 0.4 per cent higher at £21.11. After the close, SocGen put a £26.50 target on the stock and argued that investors had undervalued its data management software.
Daily Mail and General Trust rose 1.9 per cent to 860p. Late in the day, its biggest shareholder Lord Rothermere was said to be trimming his 18.7 per cent stake.
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