This week has been interesting to say the least. Fortunes have been made and fortunes have been lost as stock market participants continue to pit their wits against each other. In normal times, consensus agreement is relatively easy to reach, and volatility isn’t huge.
However, when nobody has a clue what is going on, then volatility is off the charts. It reminds me of the Joker’s quote in The Dark Knight: ‘a truckload of soldiers will be blown up, nobody panics, because it’s all “part of the plan”. But when I say one little old mayor will die, well then everyone loses their minds’.
This crash certainly wasn’t in anyone’s plans. Very few people were prepared, and it has wreaked destruction across pensions, ISAs, and leveraged spread bet accounts.
But life goes on, and the stock markets remain open for business. I’ve seen many wheel out the old ‘blood on the streets’ quote with a smiling picture of Warren Buffett. Whilst Warren Buffett wasn’t buying the AIM garbage that often accompanies said quote, it is a sentiment I agree with. Opportunity is around us. For those of us who are going to go the distance, it is indeed time to go to work.
There are many stocks that have been shorted all the way down, and it’s getting to the point where the percentage in profit is so high that it’s almost pointless holding for more. A stock that goes to 0p is paid out in full, but it often costs full margin in order to hold the position and takes months, if not over a year to be paid out. My short on Restaurant Group from around 75p, which Jack covered in yesterday’s Small Cap Value Report, was pretty much the same at 25p as it was at 30p.
I now think there are several opportunities for short squeezes. These are short and sharp moves upwards as stocks are bought by shorters covering their positions, and also traders who want to add more buying pressure knowing that there will be shorters closing.
Restaurant Group
This stock has fallen heavily, and at £117m market cap it is not yet priced to go bust. However, a 50% rice would only take this to around £180m, and so a rise is not unlikely.
The group expects to retain “a minimum of…
