Well well well. I wrote recently about Ocado (LON:OCDO) . No self-respecting value investor would buy into these shares – which no doubt explains why OCDO is one of the most heavily shorted stocks in the market. It is also shorted by none other than Jim Chanos, and appears as a short candidate on Stockopedia’s Unholy Trinity screen.
An yet, the shorters have been so very wrong so far this year. Shares had increased 61% percent YTD at the time of writing, so there was a lot of momentum behind it.
Although I didn’t say it at the time, I thought OCDO to be a dangerous short idea. The basic problem is this: it has glamour stock appeal, is heavily shorted, but the share price has a lot of momentum. In other words, as long as momentum can be maintained, traders can pile in on the long side, squeeze the shorters, and send share prices higher. Lather. Rinse. Repeat.
Then today happened. According to Motley Fool,
Ocado said the talks may lead to Morrisons paying for “certain… existing and future intellectual property and operating knowledge“.
Ocado added the negotiations did not involve any discussion of Morrisons acquiring either the whole of, or an equity stake in, Ocado.
So now we know. Just ask Whitney Tilson about the advisability of his Netflix short when it was in its glamour phase.
I hope you do the right thing!
Where next for Ocado, I wonder?