A tale of two shorts

Livewire Exclusive

Livewire Markets

While some investors may sell short to offset other positions, Simon Shields from Monash Investors Limited explains that they engage in shorting to make money. One of those shorts is betting against one of the best-known brands in the country, Coca-Cola Amatil. But why would you bet against Coke? 

“We’ve seen carbonated soft drink volumes drop by as much as 5% p.a. over the last several years, and that’s a very bad trend for Coca Cola. They’ve tried to expand into water, that worked for a while, but the barriers to entry in water are pretty low.”

In the full video, Simon also explains why they recently covered their short position in Kogan, what motivated them to short the stock in the first place, and what it would take for them to buy the stock again.

 

Key points:

  • Younger consumers are less inclined to drink sugary drinks, while older consumers are reducing intake due to health concerns
  • Even the sugar-free drinks offered under Coca Cola brands are not trusted by consumers
  • Volumes of carbonated soft drinks have dropped by as much as 5% p.a. over the last few years
  • While CCL’s Indonesian business is now tracking reasonably well, it fails to offset the profit reduction witnessed in their core market of Australia.

 

Further insights

Monash Investors aims to achieve their objectives by investing in a small number of compelling stocks that offer considerable upside, and by shorting expensive stocks that are at risk of falling. Find out more here


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