Our short/sell idea on Foxtons generated more than 6% returns for clients when the London-focused real estate agent reported worse than expected sales volumes in their first quarter update.
On 20th May 2019, Foxtons shares fell 6% at the market open after the London-based estate agency group posted a drop in sales for the last three months, warning that the market in the capital remains challenging. Management reported that the property market had seen record low sales volumes in the first quarter, hurting revenues as ongoing Brexit uncertainty continued to dampen consumer confidence. The group also reported a fall in core earnings, hurt by weaker sales and higher costs in a tough market.
Several weeks prior to the official announcement, Woozle’s proprietary sources uncovered evidence of weaker than expected sales volumes in London and the South East with less stock on the market, weaker demand, and longer times needed to complete sales versus the same period last year. Our research report to clients also highlighted increased competition from internet-driven players like Purplebricks as well as market weakness related to Brexit and a rise in stamp duty property tax which was lowering demand levels.
Our clients were able to initiate or scale their short position with enough time to capitalise on a more than 6% drop in the share price following the results announcement.