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Data Explorers yesterday published a study which shows that short sellers are increasingly focusing on companies with high net debt to equity ratios. Widening spreads between 3 month Libor and 3 month US swap rates could indicate that banks are becoming more reluctant to lend to the corporate market as inflation expectations begin to rise. This would have a negative impact on companies’ ability to refinance or raise new debt in the market. Companies of note in the report include: Yell (YELL), Debenhams, Grupo Ferrovial (OTC:GRFRF), Sacyr Vallehermoso, Caterpillar (NYSE:CAT) and AutoZone (NYSE:AZO).

We have combined Factset’s screening tools with our proprietary indicators to highlight the top ten companies in the US, Europe ex UK, Japan and the UK which have a high net debt to equity position combined with high and rising short interest.
Please click on the link below to download the full article.
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Balance Sheet Strength V02.pdf137.63 KB
Source: Corporate Leverage: Trouble Ahead?