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It is because hedge funds cant squeeze juice from a dry lemon. Both institutional investors and long investors are reluctant to sell, particularly after the CEO's recent update. They are willing to wait until the trading update for better clarity. Currently, the share price is consolidating around 20p, and once it surpasses the 8-day moving average on the technical chart, I believe it will likely test the 30-day moving average ( mid-30s), hopefully before the 20th
Looking at last year's short positions record, hedge funds consistently increased their positions until the day before the trading update (20th Dec), followed by position coverings in January. However, with the current share price at only 1/5 of last year's value, the risk of a short squeeze is significantly higher this time.
Notably, an inverted hammer formed on Friday near the 8-days moving average on the oversold technical chart. Considering PFC is currently in the oversold zone & the substantial short position by hedge funds, I anticipate the share price trend breaking the 8DMA tomorrow or on Tuesday, testing the 30DMA around the mid-30s before the update. Positive news before the trading date could push us to easily reach the 30 days moving average by midweek.
AIMO GLA
London 07.12.2023
There has been a record showcasing that the Petrofac Limited Plc share market (LSE:PFC) is consolidating, forming a basis around the line of 20.
When selling activity has reached its peak, a line of smaller trade candlesticks has developed. That assumption gives traders who commit long-term capital the opportunity to stake positions. The price may break through the smaller moving average’s line in the ensuing actions.
There has been a record showcasing that the Petrofac Limited Plc share market (LSE:PFC) is consolidating, forming a basis around the line of 20.
When selling activity has reached its peak, a line of smaller trade candlesticks has developed. That assumption gives traders who commit long-term capital the opportunity to stake positions. The price may break through the smaller moving average’s line in the ensuing actions.
Source: https://www.advfn.com/newspaper/azeez-mustapha/72392/petrofac-limited-plc-price-pfc-is-consolidating-forming-basis-at-20
They are not getting the volumes needed to cover when they drop the price, instead more of their short shares get hoovered and make them increase their short position to keep led on the sp. This wont last for much longer and we'll see meaningful rebond before the 20th
Because most of the PIs sentiment turned long and many traders took positions waiting for the 20th trading update especially after the CEO shared clarity in the latest RNS about the road map for the near future and also stated that the company continued to maintain liquidity above its financial covenant.
Now, most of the selling volume is generated by shorters trying drag the share price lower to cover before the 20th but as people say, you can squeeze juice from a dry lemon and I am expecting a meaningful sp rebound before the 20th
Morningstar fund analyst Robert Starkey praises Jupiter Special Situations manager Ben Whitmore in this regard: "Whitmore has continually shown the courage of his convictions in building the portfolio, which can look quite different from the benchmark at the sector and market-cap levels."
But when the value style of investing is out of favour (such as last year), these funds can struggle. The flipside, or course, is they can outperform when these stocks make headway. The FTSE AllShare is up around 9% in the year to date, and all our five funds are ahead of this.
UK large and mid-cap value stocks were badly out of favour last year, and thus represented some of the most compelling special situations opportunities in that period. But now they've caught up, any manager owning these stocks will now have weightings similar to the benchmark, which can limit the chance to outperform.
For example BP (BP.) constitutes 2.91% of the Liontrust Special Situations fund and 2.57% of the index (Jupiter Special Situations fund has 5.47% of its portfolio in BP - more than double the AllShare index). A bet on BP will have paid off this year, as its shares are up nearly 30%, although this comes after a 40% fall in 2020.
How Special are Special Situations Funds?
In most cases, the top 10 holdings of these funds vary significantly from the index. Aggreko (AGK) makes up just 0.09% of the benchmark, for example, but is the second biggest holding in the Liontrust fund.
These special situations funds are also much more concentrated than the AllShare index, which comprises 601 stocks, compared to between 42 holdings (Artemis) to 97 (Fidelity) holdings in the fund portfolios.
Will these funds remain "special" as the market continues to re-appraise value stocks? Fidelity's Alex Wright thinks the rotation back into value is still only just getting started after years of growth stocks having the upper hand. "UK equities, and in particular value stocks, continue to look very attractively valued in a global context, a hangover of prior Brexit uncertainty and the disproportionate impact of the pandemic on the domestic economy," he says.
According to Morningstar analysis, the majority of the most commonly held stocks are undervalued. These include 5-star rated Royal Dutch Shell (RSDB) and Imperial Brands (IMB), which are held by three and two funds respectively. Seven other stocks have 4-star ratings, while only four stocks have a 2-star rating.
https://www.morningstar.co.uk/uk/news/212896/what-do-special-situations-funds-invest-in.aspx
This was the tweet: "Breaking...
#PFC on the topic of asset sales... "Petrofac and it's advisors have held talks with a US special situations fund about a possible deal"
Now what is special situation fund is: According to MorningStar website:
"What do Special Situations Funds Invest in?Special situations funds aim to root out hidden gems - and based on performance this year, they're doing a decent job.
UK special situations funds are among the best performers so far this year as the unloved value stocks they own have returned to favour.
Last year was a productive time for special situations fund managers to pick up bargains, particularly while UK oil and banking stocks were out of favour. Their long-term view appears to have paid off, and many of these funds have enjoyed the strong rebound in these sectors.
But if special situations fund managers pride themselves on being contrarian and not following the herd - just how unique are their portfolios?
What do Special Situations Funds Invest in?
We’ve looked in detail at five top-rated special situations funds to see which unloved stocks they own and how these differs from the index. We've focused on their top 10 holdings for the sake of simplicity.
What’s immediately striking is the diversity in the top holdings. Some 33 stocks out of 50 are only held by one of the five funds. These include Aim-listed textile rental company Johnson Service Group (JSG) with a market cap of £775 million and drinks maker Diageo (DGE), which is close to £80 billion in size.
Tobacco firm Imperial Brands (IMB) and oil major BP (BP.) are the most commonly held stocks, featuring in three of the five portfolios we looked at. Stocks which feature in two funds are Aviva (AV.), sales support firm DCC (DCC), GlaxoSmithKline (GSK), AstraZeneca (AZN) and Royal Dutch Shell (RDSB).
here are two Gold-rated funds in this group, Fidelity Special Situations and Jupiter UK Special Situations, both of which have returned around 20% year to date. In their top 10 holdings, the funds have only one stock in common, Aviva (AV.), which is the second biggest holding in the Fidelity fund and the fifth biggest in the Jupiter fund.
Fidelity Special Situations has recently been upgraded from a Morningstar Analyst Rating of Silver to Gold, and features among our 10 Funds for a UK Recovery. Morningstar analyst Fatima Khizou praises manager Alex Wright’s “contrarian, value-orientated approach”. His stock-picking has been the main driver of returns and has helped it outperform its peers.
How do Special Situations Funds Invest?
Special situations funds are meant to be “benchmark agnostic”, meaning they can take concentrated bets away from the index and invest in medium, small and micro cap stocks if the manager thinks that's where the best opportunity is.
Are you for real?? Read the 6th of Dec RNS:
“The Group has continued to maintain liquidity above its financial covenant (2) and will provide further details in its trading update on 20 December 2023.”
“(2) The financial covenant for liquidity is that the Group’s liquidity (excluding cash held in joint operations) shall exceed US$75m at each month end.”
“ SHORTS INCREASED TO 8.5 PERCENT they know more than us”
Certainly, they acknowledge the necessity of expanding their short position to prevent a short squeeze. Nevertheless, Petrofac plans to release a market update in two weeks, providing insights into their financial status, selling of non-core assets, and securing funds with support from a reputable American company. the share price should at least double from today’s level upon positive update, shorters are escalating their positions daily, aiming to restrain the share price movement until at least December 20th.