WH Smith is the second-most shorted stock, while Home Retail Group, which owns Argos and Homebase, and Carpetright also appear near the top of the list, compiled using data from Bloomberg.
Ocado, Ladbrokes and Greggs are other well-known names to have significant bets made against them by short-selling institutions.
Source: Bloomberg
Weir Group remains the most shorted stock in the UK market, although the 12.96 per cent of its stock out at short-sellers is slightly down on the 13.3 per cent that was the case when FE Trustnet researched the issue in November.
The company warned that month that full-year profits would be below expectations, and the share price has yet to recover.
Performance of stock vs index over 1yr
Source: FE Analytics
The second-most shorted stock is high street stalwart WH Smith, which has 12.4 per cent of its shares out at short sellers.
The stock has had an excellent 12 months, returning 64.44 per cent against the FTSE All Share’s 17.71 per cent, according to data from FE Analytics.
Performance of stock vs index over 1yr
Source: FE Analytics
Investors need to be cautious about drawing conclusions from the presence of institutional short-sellers, as there can be a number of strategic reasons for betting against a stock.
However, WH Smith is now sitting on a P/E [price to earnings] ratio of 14.5 times compared with 13.75 times for the market, and a number of major institutions are betting on the share price falling.
Short-sellers hold 8 per cent of the stock of Home Retail Group. It is another company to have had a great 12 months, although the share price has started to fade recently. The stock is on a heady P/E of 22.8 times.
Performance of stock vs index over 1yr
Source: FE Analytics
Data from FE Investegate shows that Schroders reduced its shareholding in the stock from 15 per cent to under 12 per cent in a series of trades in December.
Retail stocks are sensitive to sentiment on Christmas trading as results are announced by their peers. Home Retail Group is due to report trading figures on 16 January.
Ocado is another stock to have had big bets made against it despite a recent stratospheric share price rise. The stock is the 11th most shorted UK company, with 6.8 per cent of its stock held by short-sellers.
The online food retailer has seen its share price appreciate by a massive 438.82 per cent in value over the past year, with investors encouraged by a deal to tie up with Morrisons.
However, critics point out that the company has still failed to turn a profit, and a number of institutions are betting on the share price falling.
With many retailers trading on high valuations, the stocks are proving themselves to be highly sensitive to trading updates.
A number of managers have in recent months told FE Trustnet that companies that miss their earnings expectations are likely to be hit hard.
This is already evident in the poor showing of Debenhams, which saw its share price fall by 12.21 per cent on 31 December after warning of poor Christmas trading. The company’s finance director has since left.
Another theme to the list of shorted stocks is mining: Arian Silver, Kazakhmys, Lonmin and Petropavlovsk all represent the mining industry in the top-10.
Kazakhmys is struggling with a cost-cutting plan that has seen it sell $1.3bn of power assets. It is also involved in discussions with the Kazakhstan government over shutting unprofitable mines. The shares lost 71.49 per cent of their value last year, but 9.3 per cent of the company’s shares are out with short sellers.
Because only 26 per cent of its shares are freely floated, this means that 36 per cent of available shares are being shorted.
Arian Silver, an explorer that is largely focused on Mexico, is still widely shorted despite having lost 84.96 per cent of its value in 2012.
Petropavlovsk, the mining firm run by Peter Hambro, father of BlackRock manager Evy, lost 79.46 per cent and still has 8.2 per cent of its shares with investors who expect further falls.
Lonmin bucked the trend for the mining sector with a modest gain of 8.55 per cent last year, but this was because the share price fell faster earlier than its peers.
Another popular sector to bet against is small cap tech. Blinkx, Nanoco Group and Physiomics are all in the top-20 most shorted stocks.
Physiomics is engaged in cancer research, Nanoco makes quantum dots and Blinkx provides software used for online video search engines.
