Hedge funds are pivoting their strategies on the ASX, moving away from targeting lithium and uranium producers that previously benefited from the commodities boom. Now, they are setting their sights on consumer stocks such as Treasury Wine Estates, Domino’s Pizza, and Guzman y Gomez, anticipating further declines in share prices as household budgets tighten.
This shift comes as the Reserve Bank of Australia (RBA) has raised the cash rate to 3.85 per cent in response to rising inflation, leading bond traders to anticipate further rate increases. Domino’s Pizza has become the most shorted stock, followed by Treasury Wine and Guzman y Gomez. VanEck’s long-short exchange-traded fund holds short positions in both Domino’s and Treasury Wine, reflecting broader concerns about the consumer discretionary sector.
Short interest in Domino’s has surged from under 7 per cent in August to around 17 per cent currently, while Guzman y Gomez has seen an increase from 7 per cent to almost 14 per cent, reflecting losses in the US market. Treasury Wine Estates, which owns Penfolds, has experienced a significant increase in short positions, rising from 7 per cent in December to over 14.3 per cent. Treasury Wine Estates generates roughly one-third of its earnings from the United States. The company has faced challenges, including declining wine consumption among younger demographics and an appreciating Australian dollar making Australian wine more expensive in the US.
Despite the negative sentiment, French billionaire Olivier Goudet recently increased his stake in Treasury Wine to 7.13 per cent, signalling his belief that the company is undervalued. Treasury Wine Estates is a global wine company that produces and distributes a portfolio of wine brands. Domino’s Pizza Enterprises is the master franchisor for the Domino’s brand in Australia, New Zealand, Europe, and Japan.
