BT Group PLC (LSE:BT.A) and Rolls-Royce Holdings PLC (LSE:RR.) are two of the most-shorted London stocks, while the “most crowded” long bets in the FTSE 100 are BP PLC (LSE:BP.) and Barclays PLC (LSE:BARC).
That’s according to UBS’s measure of the most crowded "active positions" around the world, where semiconductor company Lam Research Corporation (NASDAQ:LRCX) and Activision Blizzard Inc (NASDAQ:ATVI) were top of the global list for the past week.
Most crowded shorts globally were a who’s-who of meme-stock and private investor favourites, led by electric sportscar maker Lucid Group Inc (NASDAQ:LCID) and US share dealing service Robinhood Markets Inc (NASDAQ:HOOD), with Uber rival Grab Holdings Ltd, cinemas-and-gold-mining-investor AMC Entertainment Holdings (NYSE:AMC) and electric truck maker Rivian Automotive Inc (NASDAQ:RIVN) following close behind.
Crowding, as defined by UBS, factors are taken from prime brokerage data, stock loan data, regulatory filings and proprietary data from the investment bank itself.
For the UK list, Ocado Group PLC (LSE:OCDO) was top of the shorts crowded list for the second week, with BT moving into second, having not been in the top 10 this time last month.
Investors have been on a journey with Shell PLC (LSE:SHEL, NYSE:SHEL), which moved from being stop of the 'underweight' list in early February to being in the top 10 of the long crowded list this week.
Top 10 most crowded names globally
Long crowded
- Lam Research Corporation (NASDAQ:LRCX)
- Activision Blizzard
- Alphabet Inc (NASDAQ:GOOG)
- Thermo Fisher Scientific (NYSE:TMO) Inc
- Microsoft Corporation (NASDAQ:MSFT)
- Agilent Technologies (NYSE:A) Inc
- Booking Holdings Inc (NASDAQ:BKNG)
- Qualcomm Incorporated
- Wells Fargo & Company (NYSE:WFC)
- Merck & Co Inc (NYSE:MRK)
Short crowded
- Lucid Group Inc (NASDAQ:LCID)
- Robinhood Markets Inc (NASDAQ:HOOD)
- Grab Holdings Ltd
- AMC Entertainment Holdings (NYSE:AMC) Inc
- Rivian Automotive Inc (NASDAQ:RIVN)
- Embracer Group
- Innolux Corp
- Bentley Systems Inc
- SoFi Technologies Inc
- Au Optronics Corp
Top 10 most crowded names UK
Long crowded
- BP PLC (LSE:BP.)
- Barclays PLC (LSE:BARC)
- Ferguson PLC (LSE:FERG)
- Diageo PLC (LSE:DGE)
- NatWest Group PLC (LSE:NWG)
- Experian (LSE:EXPN) PLC
- Glencore PLC (LSE:GLEN)
- Ashtead Group PLC (LSE:AHT)
- GlaxoSmithKline PLC (LSE:GSK)
- Shell PLC (LSE:SHEL, NYSE:SHEL)
Most shorted
- Ocado Group PLC (LSE:OCDO)
- BT Group PLC (LSE:BT.A)
- AVEVA Group PLC
- Rolls-Royce Holdings PLC (LSE:RR.)
- Rentokil Initial PLC (LSE:RTO)
- Persimmon PLC (LSE:PSN)
- Hargreaves Lansdown PLC (LSE:HL.)
- Severn Trent PLC (LSE:SVT)
- Halma PLC (LSE:HLMA)
- Kingfisher PLC (LSE:KGF)
“At the most basic level, crowding is simply too many of the same type of market participants holding the same or similar positions,” explained UBS analyst Michael Gray in a research note entitled 'definitive approach to crowding' last month.
“It can be a position in a particular stock, a derivative position of that stock, or even positions that load similarly on the same types of factors as that stock.
“An example of the last point is if many market participants are loading heavily on a momentum factor, they may not hold all of the exact same positions but the overlap is nontrivial. Crowding can occur on the long or short sides of names. Both have issues and the shorts can be particularly painful at times.”
UBS said there are various reasons crowding may occur, from investors looking at similar types of 'alpha factors' such as value or momentum, or whether they are all pursuing strategies based on common news stories, or just using similar data sets to build strategies.
As the analyst noted, crowded positions and strategies can outperform for significant stretches of time, or can also drift along up or down without catalysts or events that would trigger flows in any direction.
“However, if there is a time when many market participants try to exit at the same time, things turn ugly quickly.
“During market dislocations or periods of heavy de-risking (either reducing leverage levels or exiting the position entirely), many people are trading in the same direction with sometimes limited liquidity.
“This can result in large price impacts that are directly attributable to crowding.”