The Short Report

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(
    [0] => Array
        (
            [0] => ((JBH))
            [1] => ((GUD))
            [2] => ((KCN))
            [3] => ((WTF))
            [4] => ((NWS))
            [5] => ((IMF))
            [6] => ((COH))
            [7] => ((PDN))
            [8] => ((LEI))
            [9] => ((MBN))
            [10] => ((FGE))
        )

    [1] => Array
        (
            [0] => JBH
            [1] => GUD
            [2] => KCN
            [3] => WTF
            [4] => NWS
            [5] => IMF
            [6] => COH
            [7] => PDN
            [8] => LEI
            [9] => MBN
            [10] => FGE
        )

)

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

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, November 4, 2013.

News Corp and related listings continue to dominate the monthly numbers and Top 20 shorted list but we can ignore those as demerger vagaries. Fresh shorting activity continued to remain subdued last week with only one increase of one percentage point or more and one decrease. The shorters continue to circle Kingsgate as gold price risk continues to bring the company's funding plans into question. By contrast, the shorters are taking profits as the Wotif share price sinks.

Six monthly short increases of two percentage points or more were met by three decreases last week. Cochlear effectively remains at the top of the table with its shorts incrementally building as market share erosion threatens. Paladin remain a shorters favourite on ever weaker uranium prices while Leighton's bribery scandal is ongoing fodder for the downside. Long term short favourite JB Hi-Fi ((JBH)) slipped out of the Top 20 last week as consumer confidence recovers allowing a struggling GUD Holdings ((GUD)) to sneak in at number 20.

Weekly Short Upgrades

Shorts in Kingsgate Consolidated ((KCN)) increased to 12.20% from 10.73%

Kingsgate shares have continued to slide since the company’s AGM and the shorters continue to build positions. Management is upbeat but analysts are concerned funding for KCN’s growth projects is at risk in a volatile gold price environment, with a capital raising possibly unable to be avoided. Shorters are looking to cash in on a discounted placement. KCN has shot to number 6 on the Top 20 most shorted list from 9 last week.

Weekly Short Decreases

Shares in Wotif.com ((WTF)) decreased to 4.23% from 7.07%

Wotif shares have fallen steeply since the company’s AGM. WTF announced new initiatives to offset ongoing weakness in hotel bookings, but the market was not convinced. Unlike KCN above, the shorters have seen weakness as an opportunity to cash in on previously established positions.

Monthly Short Increases

Shorts in News Corp ((NWS)) increased to 8.44% from 0.97%

News Corp related listings continue to dominate the short list and will do so on a monthly basis until the demerger is finally put to bed on the ASX.

Shorts in Kingsgate Consolidated increased to 12.20% from 8.00%

See above.

Shorts in IMF ((IMF)) increased to 3.31% from 0.86%

IMF investigates, manages and funds litigation claims in Australia and the US but is not covered by FNArena database brokers.

Shorts in Cochlear ((COH)) increased to 16.48% from 14.12%

The news continues to be negative for Cochlear, with evidence of an acceleration in market share erosion now empirical. COH shares have fallen over the month but clearly not enough for the shorters, who have spent the month ensuring COH is the most shorted stock on the ASX (not counting News Corp related positions).

Shorts in Paladin Energy ((PDN)) increased to 9.45% from 7.28%

Paladin is burning cash. The spot uranium price tracked lower over October, and the shorters appear to be banking on another capital raising.

Shorts in Leighton Holdings ((LEI)) increased to 6.79% from 4.71%

Bribery charges have weighed heavily on Leighton over the past month, and with proceedings yet to play out, the shorters have moved in.

Monthly Short Decreases

Shorts in Wotif.com decreased to 4.23% from 8.74%

See above.

Shorts in Mirabela Nickel ((MBN)) decreased to 2.67% from 5.77%

Mirabela Nickel remains in a trading halt.

Shorts in Forge Group ((FGE)) decreased to 1.62% from 4.14%

Forge shares have been slipping since it became apparent some of the company’s big contracts are being pushed out in timing, thus impacting on near term earnings forecasts and placing a lot more reliance on the Roy Hill relationship. The shorters have been cashing in.

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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