Very occasionally, my grumpy bearishness pays off. This has definitely been the case with two UK shares recently.
Off the boil
I’ve been nervous about the share price of Ocado (LSE: OCDO) for, quite literally, years. As much as I would have liked to see a 1,000% or so return between 2018 and 2021, I just couldn’t shake the feeling that a lot of this momentum was built on hot air.
That’s fine for the sort of investor (cough, trader) that aims to time the market consistently. But this Fool knows he can’t.
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To be clear, I have no issue with the company’s end-to-end online grocery fulfilment solutions. It’s all impressive stuff on a technical level. And there was a time when Ocado appeared to be penning many deals, which is good news for the stock.
The problem is that it takes so long for these contracts to come to fruition. In the meantime, it has rising debt, a poorly performing retail arm, and no dividends to soothe the pain.
Jam tomorrow? Jam 2030, more like.
Short-selling favourite
Interestingly, Ocado now tops the table of most shorted UK shares. So, many traders still believe the company’s value has further to fall.
That’s quite something considering just how far the price has already dropped since early 2021.
Yes, short sellers can be wrong. And yes, some vaguely good news could send the stock flying as they rush to close their positions.
Even so, I believe anyone thinking of investing here needs to have a bulletproof case for feeling bullish in the short-to-medium term. Shorters tend to be extremely well-researched market participants because their potential losses are technically unlimited.
As a result, I remain as comfortable avoiding Ocado shares as I ever was.
Back to earth
Another of my better bearish calls has been gifting platform Moonpig (LSE: MOON).
I don’t doubt that this is one of the bigger players in its niche. And, cards firmly on the table, I use its site myself now and then.
However, what I never do is buy any of the additional products it offers to customers as they prepare to pay, such as flowers or balloons or toys or chocolates. Why? Because I know that I can get these things far cheaper elsewhere. Ominously for Moonpig, I felt this way long before the cost-of-living crisis.
And when its quest for growth depends on getting people to buy these extras, that strikes me as a bit of a red flag in the investment case.
No confidence
Perhaps I’m being unfair. The company recently stated that trading had been “resilient” in the second half of its financial year to date. It also recorded its largest-ever week of sales in the UK ahead of Mother’s Day.
But a flagging share price suggests other people/investors may feel the same way as me. Perhaps most tellingly, Moonpig is now the second most hated of all UK shares, just behind Ocado.
Granted, a sustained drop in inflation may bring out the buyers. The current price-to-earnings (P/E) ratio of 13 doesn’t feel excessive either.
But even if Moonpig stock made back its losses, I doubt I’d ever want to own a slice.
There are simply too many companies with far better business models out there to choose from.
