The Short Report

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(
    [0] => Array
        (
            [0] => ((MYR))
            [1] => ((FXJ))
            [2] => ((DJS))
            [3] => ((VAH))
            [4] => ((RSG))
            [5] => ((AGO))
            [6] => ((SGT))
            [7] => ((TSE))
            [8] => ((IVC))
            [9] => ((COH))
            [10] => ((FLT))
            [11] => ((ALQ))
            [12] => ((JBH))
            [13] => ((WHC))
            [14] => ((BKN))
            [15] => ((ASL))
            [16] => ((SBM))
            [17] => ((PRU))
            [18] => ((MIN))
        )

    [1] => Array
        (
            [0] => MYR
            [1] => FXJ
            [2] => DJS
            [3] => VAH
            [4] => RSG
            [5] => AGO
            [6] => SGT
            [7] => TSE
            [8] => IVC
            [9] => COH
            [10] => FLT
            [11] => ALQ
            [12] => JBH
            [13] => WHC
            [14] => BKN
            [15] => ASL
            [16] => SBM
            [17] => PRU
            [18] => MIN
        )

)

This story features MYER HOLDINGS LIMITED, and other companies.
For more info SHARE ANALYSIS: MYR
The company is included in ASX300 and ALL-ORDS

Guide:

The Short Report draws upon data provided by the Australian Securities & Investment Commission (ASIC) to highlight significant weekly and monthly moves in short positions registered on stocks listed on the Australian Securities Exchange (ASX).

Please take note of the Important Information provided at the end of this report. Percentage amounts in this report refer to percentage of ordinary shares on issue.

Summary:

Period: Week to, and month to, September 19, 2013.

With result season having faded away but for several retailers, and the election now done and dusted, short position movements eased off last week. Weekly increases/decreases of one percentage point or more matched each other at two-all. Most noticeable in that group was Virgin Australia, the shares of which have rallied post result despite underwhelming outlooks from analysts, subsequently arousing the shorters.

On a monthly basis the theme of post result season reductions in short positions continues, with all the now usual suspects making up the numbers as post-result responses work their way out of the monthly system. Short reductions of 2ppt or more outweighed increases by 10-4. The Top 5 most shorted stocks are still in place, albeit with a little bit of position shifting. Myer ((MYR)) has taken over Fairfax ((FXJ)) at number one, ahead of David Jones ((DJS)), now at number 7, reporting a well-received result this week. Consumer discretionary and mining services names continue to dominate the Top 20.

Weekly Short Increases

Shorts in Virgin Australia ((VAH)) increased to 6.21% from 3.79%

Virgin reported its full-year result a fortnight before the week in question. It was a weak result and while brokers suggested at the time FY14 may provide a turnaround, there was certainly no excitement as to its potential and most brokers saw the stock as well-valued. Yet still VAH rallied around 10% from result to the period in question, which has clearly brought out the shorters.

Shorts in Resolute Gold ((RSG)) increased to 1.80% from 0.52%

When the Fed didn’t announce tapering last week, brokers adjusted their gold price forecasts higher. It was enough for Citi – the only FNArena broker covering Resolute – to upgrade the stock to Buy from Sell. But this all happened subsequent to the period in question, in which RSG continued its slide. Perhaps the shorters sensed blood.

Weekly Short Decreases

Shorts in Atlas Iron ((AGO)) decreased to 4.64% from 5.74%

Atlas announced record monthly gold shipments in the period, and the iron ore price continues to prove resilient. The share price rose on the news despite brokers warning the rail link AGO now needs will be costly. Shorters eased off.

Shorts in Singapore Telecom ((SGT)) decreased to 0.48% from 1.48%

SingTel shares have rallied since the election, likely reflecting greater opportunity under a Coalition NBN policy given there has been no new company news. The shorters have backed away.

Monthly Short Increases

Shorts in Transfield Services ((TSE)) increased to 10.73% from 6.08%

Transfield leapt up the Top 20 shorted table the week before, from 18 to 6, after an earnings result which did not assuage fears of the possible need for an equity raising. This monthly move reflects that surge, albeit TSE has slipped down the table to 8 this week.

Shorts in Virgin Australia increased to 6.21% from 3.60%

See above.

Shorts in Invocare ((IVC)) increased to 5.34% from 3.08%

Invocare took a dive back in August following a disappointing full-year result which highlighted a surprisingly lower number of Aust/NZ departures from this earth than could normally be relied upon. This defensive stalwart has consolidated since, but perhaps the shorters are balancing against longs in cyclical stock positions on a growing “risk on” portfolio allocation play.

Shorts in Cochlear ((COH)) increased to 12.25% from 10.23%

Cochlear has become a Top 20 regular on the back of concerns over increasing competition in the hearing space and a stubbornly full valuation from the market. COH shares rallied over the period and the stock has moved to 4 from 5 on the table.

Monthly Short Decreases

Shorts in Flight Centre ((FLT)) decreased to 3.46% from 9.99%

Flight Centre shares have mostly risen post another impressive result in August which caught out the shorts, and subsequently FLT has dropped out of the Top 20 most shorted, where it had spent plenty of time, and continues to fall down the table.

Shorts in ALS ((ALQ)) decreased to 6.16% from 9.16%

A strong bounce in ALS the period before brought the stock into weekly contention last week, with short-covering exacerbating the move. This monthly shift is representative of that sudden weekly move.

Shorts in JB Hi-Fi ((JBH)) decreased to 8.88% from 11.64%

Once number one, JB Hi-Fi is quietly moving down the top 20 list (albeit this week has again stalled at 16 as other stocks have also seen reductions) post a solid earnings result and improving consumer confidence in the wake of RBA rate cuts.

Shorts in Whitehaven Coal ((WHC)) decreased to 7.57% from $10.32%

Whitehaven has been jumping in and out of the Top 20 around the 20 mark the last couple of weeks, with Maules Creek approval uncertainty fodder for shorters. Despite this reduction, WHC is back in at 20 again this week as Ansell has dropped out.

Shorts in Singapore Telecom decreased to 0.48% from 3.00%

See above.

Shorts in Bradken ((BKN)) decreased to 7.81% from 10.28%

Since posting a better than expected result, Bradken shares enjoyed a jump but consolidated somewhat in the week in question. Slipping from 18 to 19 in the table this week, this monthly move reflects the earlier short-covering period.

Shorts in Ausdrill ((ASL)) decreased to 4.04% from 6.43%

Ausdrill has actually shot up today, but in the week in question the price consolidated following the 100% plus jump post earnings result. This monthly move is still reflecting that post-result subsequent short-covering scramble.

Shorts in St Barbara ((SBM)) decreased to 2.47% from 4.84%

St Barbara saw a big drop in shorts the week before given ongoing gold price volatility surrounding Fed tapering speculation. This monthly move reflects that drop.

Shorts in Perseus Mining ((PRU)) decreased to 1.58% from 3.69%

Perseus shorts have been slowly reducing since the August result release included the suggestion problems at the Edikan mine have now been resolved.

Shorts in Mineral Resources ((MIN)) decreased to 1.84% from 3.88%

This reduction in Mineral Resources shorts looks to be the result of short-covering, as MIN has risen steadily over the month in question. News of the loss of management of Fortescue’s Christmas Creek arose post this period.
 

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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