The Short Report

Array
(
    [0] => Array
        (
            [0] => ((WHC))
            [1] => ((GUD))
            [2] => ((WTF))
            [3] => ((NWS))
            [4] => ((COH))
            [5] => ((PDN))
            [6] => ((KCN))
            [7] => ((FXJ))
            [8] => ((MBN))
            [9] => ((TSE))
        )

    [1] => Array
        (
            [0] => WHC
            [1] => GUD
            [2] => WTF
            [3] => NWS
            [4] => COH
            [5] => PDN
            [6] => KCN
            [7] => FXJ
            [8] => MBN
            [9] => TSE
        )

)

This story features WHITEHAVEN COAL LIMITED, and other companies.
For more info SHARE ANALYSIS: WHC
The company is included in ASX100, ASX200, 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, October 24, 2013.

With the AGM season in full swing and the Australian stock market pushing past five-year highs, shorting activity, both in increase and decrease terms, went very quiet last week. Nor are there any new faces appearing in monthly movements, which simply reflect post reporting season effects working their way out of the numbers. Leaving the whole News Corp demerger impact out of what is true shorting activity, there were no weekly short increases of one percentage point or more last week and only two decreases. A rare rally in GUD has seen its shorts reduce while weakness in Wotif has prompted shorters to cash in.

In the monthly numbers, Cochlear and Paladin remain shorting favourites with Kingsgate another Top 20 stalwart on the radar. Three monthly short increases of two percentage points or more matched three decreases. Mirabela remains in voluntary suspension. The reduction in Wotif shorts saw the stock leave the Top 20 last week, with Whitehaven Coal ((WHC)) sneaking back in.

Weekly Short Increases

There were no short increases in excess of one percentage point last week other than News Corp non-voting shares (NWSLV) which reflects the demerger.

Weekly Short Decreases

Shorts in GUD Holdings ((GUD)) decreased to 7.30% from 8.97%

There’s been no new news emanating from the GUD camp since a poorly received FY13 result and subsequent share price fall, but after a period of consolidation the share price began to tick up again over the week in question. This likely explains a few shorts leaving the building.

Shorts in Wotif.com Holdings ((WTF)) decreased to 7.07% from 8.39%

Wotif held its AGM during the week in question and conceded that the local accommodation market remains flat. Despite announcing new initiatives aimed at turning things around in the second half, WTF’s shares were punished and some shorters cashed in. WTF has now dropped out of the Top 20 shorted list.

Monthly Short Increases

Large short increases in News Corp ((NWS)) related instruments reflect the company demerger.

Shorts in Cochlear ((COH)) increased to 16.45% from 13.49%

Cochlear remains in effective number one spot on the (not counting News A shares). The company’s AGM two week’s suggested confidence from management but analysts didn’t buy it. COH shares tried to rally last week but have since failed. The stock attracts seven Sell ratings out of eight brokers in the FNArena database.

Shorts in Paladin Energy ((PDN)) increased to 9.25% from 6.56%

Paladin shorts continue to rise on a monthly basis, having previously fallen from lofty levels after the company secured fresh funding. Every day the spot uranium price fails to improve the company burns more cash and further falls in the uranium price have seen PDN shares falter once more.

Shorts in Kingsgate Consolidated ((KCN)) increased to 10.73% from 8.18%

Kingsgate remains at number nine in the Top 20 shorted table as it struggles to balance growth plans with low cashflow from a weak gold price. Last week’s production report suggested operations are improving, yet funding options remain KCN’s biggest hurdle.

Monthly Short Decreases

Shorts in Fairfax Media ((FXJ)) decreased to 10.88% from 13.22%

Fairfax shares actually posted a bit of a rally over the week in question, but on a monthly basis we are still seeing the lingering impact of shorters cashing in after a poorly received FY13 result. FXJ sits at number eight on the Top 20.

Shorts in Mirabela Nickel ((MBN)) decreased to 2.63% from 4.86%

Having missed an interest payment on its bond issue, Mirabela hangs in the balance and the shares are still in voluntary suspension.

Shorts in Transfield Services ((TSE)) decreased to 7.89% from 9.95%

Transfield shot up the short table a month ago following a result release which did not assuage fears of another equity raising being needed. The problem for shorters is the stock has rallied this month and hence TSE fell out of the Top 20 last week on short-covering, although it has snuck back in at 20 this week.

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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