Before buying any UK share I always check to see which London Stock Exchange shares are most shorted. The list provided by shorttracker.co.uk shows which British stocks institutional investors and hedge funds are betting heavily against. And, right now, the Cineworld Group (LSE: CINE) share price is firmly in their crosshairs.
As I type, a whopping 7.2% of Cineworld’s shares are being shorted. The level of shorting here is beaten only by J Sainsbury. Short interest on the FTSE 100 supermarket stands at 7.6%.
Of course these institutional investors and hedge funds don’t always make the right call. But it’s still worth considering what these highly-experienced, financially-savvy organisations have to think about a particular UK share. And in the case of the Cineworld share price I’m afraid I share their pessimism.
Even when Cineworld’s cinemas are fully reopened in the US and UK, there’re likely to be revenues-sapping capacity restrictions in place due to the ongoing Covid-19 crisis. This is a particular worry given the colossal amount of debt that Cineworld has on its books.
There’s also the long-term danger posed by streaming giants like Netflix and Amazon, companies that threaten to keep movie fans planted firmly on their couches.
Cineworld’s share price sinks again
There’s always two sides to every UK share, of course. And it’s possible that the huge investment Cineworld is making on cinema refurbishments and on novel ideas like its 4DX interactive theatres will pay off handsomely in the long run. There’s also the possibility that moviegoers could be queueing round the block to get into its cinemas if strong coronavirus vaccine rollouts continue in the US and UK.
That said, the risks this UK share faces are still too high in my book. And I believe the Cineworld share price could keep on sinking (it just dropped to two-and-a-half-month lows around 93p per share).
I’d rather buy these penny stocks!
There are plenty of other penny stocks I’d rather buy today instead of Cineworld. And, like the cinema operator, these UK shares change hands at a price below £1. Here are a few on my radar today:
- I think Airtel Africa has a bright future as telecoms demand in African emerging markets balloons. This UK share saw revenues soar 13% in the nine months to December, latest financials showed. Bear in mind though, Airtel has a not-inconsiderable amount of debt on its books that could cause future problems.
- Gaming Realms also looks more attractive than the Cineworld share price, in my opinion. This penny stock makes and licences casino games for mobile devices, allowing it to exploit the soaring popularity of online gambling. I think it’s a great buy despite its massively-competitive marketplace.
- I also like the look of Accrol Group. Its share of the ultra-defensive toilet roll market continues to grow and grow. And margins are booming, thanks to improving product mix. I think it’s a top penny stock to buy despite the problem of rising paper costs.
John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Royston Wild has no position in any of the shares mentioned. The Motley Fool UK owns shares of and has recommended Amazon and Netflix and recommends the following options: long January 2022 $1920 calls on Amazon and short January 2022 $1940 calls on Amazon. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.