The Short Report

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            [0] => ((JBH))
            [1] => ((FLT))
            [2] => ((TRS))
            [3] => ((HVN))
            [4] => ((MYR))
            [5] => ((DJS))
            [6] => ((FMG))
            [7] => ((PDN))
            [8] => ((LYC))
            [9] => ((CSR))
            [10] => ((BLD))
            [11] => ((MSB))
            [12] => ((COH))
            [13] => ((DTE))
            [14] => ((SWM))
            [15] => ((GRY))
            [16] => ((DML))
            [17] => ((EGP))
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    [1] => Array
        (
            [0] => JBH
            [1] => FLT
            [2] => TRS
            [3] => HVN
            [4] => MYR
            [5] => DJS
            [6] => FMG
            [7] => PDN
            [8] => LYC
            [9] => CSR
            [10] => BLD
            [11] => MSB
            [12] => COH
            [13] => DTE
            [14] => SWM
            [15] => GRY
            [16] => DML
            [17] => EGP
        )

)

This story features JB HI-FI LIMITED, and other companies.
For more info SHARE ANALYSIS: JBH
The company is included in ASX100, ASX200, ASX300 and ALL-ORDS

By Chris Shaw

Decreases in short positions outweighed increases for the week from July 24, as while only one company saw total shorts increase by more than 1.0 percentage points there were four cases of shorts falling by a similar magnitude.

The major increase in short positions for the week was in Blackthorn Resources ((BTR)), where total shorts jumped to 1.83% from 0.05% previously. Further exploration work at the Mumbwa project is expected to deliver an increase in resources but the market has adjusted positions to account for an equity raising by the company to further project work at Mumbwa and elsewhere.

Other increases of note were in Alumina ((AWC)) and Iluka ((ILU)), where short positions increased over the week by between 0.5 and 1.0 percentage points. Both stocks are among the top 20 short positions on the Australian market.

Shorts also rose in Campbell Brothers ((CPB)) to 2.19% from 1.72% previously, this as outlook commentary at the company's annual general meeting proved cautious given a softer outlook for minerals exploration expenditure.

Among decreases to short positions the largest was in Billabong ((BBG)), where total positions fell to 2.8% from 9.27% in the week from July 24. The change comes as private equity group TPG has again emerged as a potential suitor for the company.

Shorts in Gunns ((GNS)) also declined over the week to 6.49 from 8.89%, this before the company yesterday advised the market of significant impairment charges to be taken at the upcoming full year result to reflect changes in woodchip market conditions.

Both Gunns and Billabong have been in the market's top 20 in terms of total short positions for some time but the fall in shorts in Billabong sees the company drop off this list. Discretionary retail exposures continue to dominate given significant positions in JB Hi-Fi ((JBH)), Flight Centre ((FLT)), The Reject Shop ((TRS)), Harvey Norman ((HVN)), Myer ((MYR)) and David Jones ((DJS)).

Resource companies are taking a more prominent position among the largest shorts in the market as aside from Alumina and Iluka, the top 20 includes Fortescue Metals ((FMG)), Paladin ((PDN)) and Lynas Corporation ((LYC)).

CSR ((CSR)) and Boral ((BLD)) are also both in the top 20 in total shorts, while Mesoblast ((MSB)) and Cochlear ((COH)) give the healthcare and biotech sector some representation.

Shorts in Dart Energy ((DTE)) fell to 2.24% in the week from July 24 from 3.58% the week prior as the company's quarterly report showed further progress at Liulin project. In general the update met expectations according to Deutsche Bank.

In Seven West Media ((SWM)) total shorts declined to 4.01 from 5.35% previously, this as the market continues to re-position following a recent $440 million capital raising by the company.

With respect to monthly changes in short positions, the period from June 29 showed the largest increases were in The Reject Shop and Alumina at more than three percentage points each. Shorts in Gryphon Minerals ((GRY)) and Discovery Metals ((DML)) also rose by around two percentage points each.

Short positions in the former rose despite a quarterly report suggesting further resource upgrades can be expected in coming months, while the latter's quarterly report confirmed the company does not have particularly low cost operations.

The largest fall in short positions for the month from June 29 was in Billabong, while shorts in Echo Entertainment ((EGP)) also declined by more than three percentage points to 2.71% in total. There were signs during the period of improving operating momentum, while there continues to be the possibility of corporate activity involving Echo given stakes held by potential suitors.
 

Top 20 Largest Short Positions

To see the full Short Report, please go to this link

IMPORTANT INFORMATION ABOUT THIS REPORT

The above information is sourced from daily reports published by the Australian Investment & Securities Commission (ASIC) and is provided by FNArena unqualified as a service to subscribers. FNArena would like to make it very clear that immediate assumptions cannot be drawn from the numbers alone.

It is wrong to assume that short percentages published by ASIC simply imply negative market positions held by fund managers or others looking to profit from a fall in respective share prices. While all or part of certain short percentages may indeed imply such, there are also a myriad of other reasons why a short position might be held which does not render that position “naked” given offsetting positions held elsewhere. Whatever balance of percentages truly is a “short” position would suggest there are negative views on a stock held by some in the market and also would suggest that were the news flow on that stock to turn suddenly positive, “short covering” may spark a short, sharp rally in that share price. However short positions held as an offset against another position may prove merely benign.

Often large short positions can be attributable to a listed hybrid security on the same stock where traders look to “strip out” the option value of the hybrid with offsetting listed option and stock positions. Short positions may form part of a short stock portfolio offsetting a long share price index (SPI) futures portfolio – a popular trade which seeks to exploit windows of opportunity when the SPI price trades at an overextended discount to fair value. Short positions may be held as a hedge by a broking house providing dividend reinvestment plan (DRP) underwriting services or other similar services. Short positions will occasionally need to be adopted by market makers in listed equity exchange traded fund products (EFT). All of the above are just some of the reasons why a short position may be held in a stock but can be considered benign in share price direction terms due to offsets.

Market makers in stock and stock index options will also hedge their portfolios using short positions where necessary. These delta hedges often form the other side of a client's long stock-long put option protection trade, or perhaps long stock-short call option (“buy-write”) position. In a clear example of how published short percentages can be misleading, an options market maker may hold a short position below the implied delta hedge level and that actually implies a “long” position in that stock.

Another popular trading strategy is that of “pairs trading” in which one stock is held short against a long position in another stock. Such positions look to exploit perceived imbalances in the valuations of two stocks and imply a “net neutral” market position.

Aside from all the above reasons as to why it would be a potential misconception to draw simply conclusions on short percentages, there are even wider issues to consider. ASIC itself will admit that short position data is not an exact science given the onus on market participants to declare to their broker when positions truly are “short”. Without any suggestion of deceit, there are always participants who are ignorant of the regulations. Discrepancies can also arise when short positions are held by a large investment banking operation offering multiple stock market services as well as proprietary trading activities. Such activity can introduce the possibility of either non-counting or double-counting when custodians are involved and beneficial ownership issues become unclear.

Finally, a simple fact is that the Australian Securities Exchange also keeps its own register of short positions. The figures provided by ASIC and by the ASX at any point do not necessarily correlate.

FNArena has offered this qualified explanation of the vagaries of short stock positions as a warning to subscribers not to jump to any conclusions or to make investment decisions based solely on these unqualified numbers. FNArena strongly suggests investors seek advice from their stock broker or financial adviser before acting upon any of the information provided herein.

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