The Short Report

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            [0] => ((FKP))
            [1] => ((PAN))
            [2] => ((HGO))
            [3] => ((NWS))
            [4] => ((FOX))
            [5] => ((AGO))
            [6] => ((RCR))
            [7] => ((TGS))
            [8] => ((MSB))
            [9] => ((VAH))
            [10] => ((QAN))
            [11] => ((SGT))
            [12] => ((MYR))
            [13] => ((NUF))
            [14] => ((GWA))
            [15] => ((SCP))
            [16] => ((MTU))
            [17] => ((CAB))
            [18] => ((BDR))
            [19] => ((UGL))
            [20] => ((HVN))
            [21] => ((BLD))
            [22] => ((COH))
            [23] => ((PDN))
            [24] => ((IVC))
            [25] => ((DJS))
            [26] => ((MQA))
            [27] => ((MDL))
            [28] => ((KCN))
            [29] => ((BKN))
            [30] => ((ILU))
            [31] => ((RIO))
            [32] => ((FXJ))
            [33] => ((WHC))
            [34] => ((BLY))
            [35] => ((SGM))
            [36] => ((WTF))
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    [1] => Array
        (
            [0] => FKP
            [1] => PAN
            [2] => HGO
            [3] => NWS
            [4] => FOX
            [5] => AGO
            [6] => RCR
            [7] => TGS
            [8] => MSB
            [9] => VAH
            [10] => QAN
            [11] => SGT
            [12] => MYR
            [13] => NUF
            [14] => GWA
            [15] => SCP
            [16] => MTU
            [17] => CAB
            [18] => BDR
            [19] => UGL
            [20] => HVN
            [21] => BLD
            [22] => COH
            [23] => PDN
            [24] => IVC
            [25] => DJS
            [26] => MQA
            [27] => MDL
            [28] => KCN
            [29] => BKN
            [30] => ILU
            [31] => RIO
            [32] => FXJ
            [33] => WHC
            [34] => BLY
            [35] => SGM
            [36] => WTF
        )

)

This story features HILLGROVE RESOURCES LIMITED, and other companies.
For more info SHARE ANALYSIS: HGO

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 7, 2013.

What a difference a week makes. October was a month which saw very little movement in ASX short positions, up or down, and the usual suspects dominated the tables. The usual suspects are still hanging around on a monthly movement basis (Cochlear, Paladin, Fairfax et al) but suddenly last week we had an explosion in short movements. Seven weekly increases in excess of one percentage point or more met no less than nineteen equivalent decreases. Resource and related stocks were prominent among the short increases, with a rash of capital raisings offering up arbitrage plays. There was a lot more variety among nineteen short decreases,as one might expect, other than a leaning towards stocks one way or another exposed to the Australian housing recovery (eg Boral, Harvey Norman) and improvement in consumer sentiment (eg Myer, David Jones). Quarterly updates across the market during the period provided fodder for the shorters, up or down.

Monthly movements were more biased, with nine short increases of two percentage points or more meeting only one decrease (Wotif). Aside from familiar names, a struggling Boart Longyear joined the throng alongside Sims Metal Management, which is suffering from a chronic oversupply of US scrap metal.
 

Weekly Short Increases

Shorts in FKP Property ((FKP)) increased to 6.26% from 3.33%

A week earlier, FKP announced a highly dilutive rights issue intended to raise cash to reduce gearing to 19.3% from 31.5%. Short positions will reflect an arbitrage play on the rights.

Shorts in Panoramic Resources ((PAN)) increased to 1.31% from 0.02%

Panoramic placed $15m in new capital for the purpose of raising funds to assist in the development of its Lanfranchi and Savannah projects. Short positions will reflect an arbitrage play on the placement.

Shorts in Hillgrove Resources ((HGO)) increased to 1.71% from 0.50%

Hillgrove raised new capital in late September but has quickly rebounded in the interim. No new news has been forthcoming and the one FNArena database broker covering the stock – JP Morgan – retains a Neutral rating.

Shorts in News Corp ((NWS)) increased to 9.62% from 8.44%

News Corp shorts continue to be tied up in the tangle of the demerger and/or reflect a pairs trade against spin-off partner 21^st Century Fox ((FOX)). The company has posted subsequently its quarterly.

Shorts in Atlas Iron ((AGO)) increased to 6.29% from 5.15%

Atlas delivered a strong quarterly production report the week before, prompting a share price jump and subsequent ratings downgrades from three FNArena brokers. Atlas is highly leveraged to a currently solid iron ore price, but still has the issue of rail access to resolve.

Shorts in RCR Tomlinson ((RCR)) increased to 1.21% from 0.11%

RCR’s share price was volatile over the week in question following the announcement of a new CFO.

Shorts in Tiger Resources ((TGS)) increased to 1.12% from 0.12%

Tiger made a $42.5m share placement in the week in question. Short positions will likely reflect an arbitrage play on the placement.

Weekly Short Decreases

Shorts in Mesoblast ((MSB)) decreased to 4.07% from 6.36%

Mesoblast leapt in share price the week before when the FDA approved a phase 3 trial for a US stem cell company’s drug, and fell back in the week in question, likely offering a chance for shorts to reduce.

Shorts in Virgin Australia ((VAH)) decreased to 3.77% from 5.84%

There has been no news recently from Virgin and its share price was steady during the week in question. Qantas ((QAN)) did announce an intention to move 747 maintenance offshore so there might be a VAH-QAN pairs trade going on here.

Shorts in Singapore Telecom ((SGT)) decreased to 0.47% from 2.48%

Shorts in SingTel seem to go up and down every other week without obvious reason, but total shorts remain on the low side.

Shorts in Myer ((MYR)) decreased to 12.11% from 13.74%

David Jones posted better than expected quarterly sales during the week in question, prompting a share price jump for both DJS and rival Myer. Ahead of this week’s equivalent Myer report, a few shorts got cold feet. MYR nevertheless remains at number 6 in the Top 20 shorted.

Shorts in Nufarm ((NUF)) decreased to 3.20% from 4.77%

There has been no new news from Nufarm and little share price movement, but this short decrease occurred prior to a rash of agri-related company earnings reports. Perhaps it was a safety play.

Shorts in GWA Group ((GWA)) decreased to 3.00% from 4.57%

GWA shares had a good run over the week in question, fuelled by promising signs of a housing recovery. Looks like some short covering was forced.

Shorts in Shopping Centres Australia ((SCP)) decreased to 3.77% from 5.30%

There has been no new news from Shopping Centres and little share price movement recently. A short reduction may imply some pairs trading within the retail REIT sector.

Shorts in M2 Telecommunications ((MTU)) decreased to 2.94% from 4.45%

M2 shares have performed well since October so perhaps this reduction represents squaring up ahead of the company’s AGM, which was held last week.

Shorts in Cabcharge ((CAB)) decreased to 10.99% from 12.46%

There has been no new news from Cabcharge of late, although a dark cloud hangs perennially over this one time monopoly as state governments reconsider their taxi policies. CAB shares took a dive in the week in question, allowing some shorts to cash in, but the stock remains at number 8 in the Top 20 most shorted.

Shorts in Beadell Resources ((BDR)) decreased to 3.62% from 5.06%

Despite a strong production report the week before, Beadell shares have since followed down the gold price and likely allowed a few shorts to cash in.

Shorts in UGL ((UGL)) decreased to 10.66% from 12.09%

UGL held its AGM just before the week in question and did not reaffirm guidance, prompting a share price slide. Despite this reduction, UGL remains at number 9 in the Top 20 most shorted.

Shorts in Harvey Norman ((HVN)) decreased to 4.65% from 6.06%

Despite an uninspiring quarterly sales report, Harvey Norman has enjoyed share price popularity of late on the back of the apparent housing market recovery, likely prompting some short covering.

Shorts in Boral ((BLD)) decreased to 4.79% from 6.09%

Boral has enjoyed share price popularity of late on the back of the apparent housing market recovery, although the management remained cautious at the company’s AGM, not offering guidance, and brokers continue to see risks. Still, a few of the shorts are having second thoughts.

Shorts in Cochlear ((COH)) decreased to 15.18% from 16.48%

Cochlear remains the most shorted stock on the market, and continues to struggle with competition and market share issues. This reduction is of little consequence in the scheme of things.

Shorts in Paladin Energy ((PDN)) decreased to 8.19% from 9.45%

The spot uranium price posted a rare gain in the week in question, although Paladin shares offered little response. PDN sits at number 19 in the Top 20 and continues to burn cash at these uranium price levels, but perhaps some shorts are concerned the uranium price might bounce.

Shorts in Invocare ((IVC)) decreased to 4.68% from 5.93%

This once must-have defensive has seen its share price slip sliding away ever since an FY13 result which showed an unusual drop in deaths. Invocare shorts tend to move around a bit but in this case its looks like some cashing in.

Shorts in David Jones ((DJS)) decreased to 9.41% from 10.60%

See Myer above. David Jones remains at number 15 in the Top 20 most shorted.

Shorts in Macquarie Atlas Roads ((MQA)) decreased to 1.62% from 2.79%

Mac Atlas shares slipped a bit in the week in question after the French government introduced new transport tax measures which have the potential to impact on toll traffic. Shorters (and or toll road pairs traders) took some profits.

Shorts in Mineral Deposits ((MDL)) decreased to 1.42% from 2.58%

Shares in Mineral Deposits slipped over the period as weakness in rutile pricing rightly or wrongly impacts on MDL perception. Shorters have taken some profits.

Monthly Short Increases

Shorts in Kingsgate Consolidated ((KCN)) increased to 12.12% from 5.48%

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 moved to number 5 on the Top 20 most shorted list from 6 last week.

Shorts in Bradken ((BKN)) increased to 9.98% from 6.12%

Bradken shares fell sharply last week following an AGM which suggested management is heavily reliant on a second half earnings skew in order to deliver on full-year guidance. Shorts have been building for some time and Bradken sits at number 10 on the Top 20.

Shorts in Iluka Resources ((ILU)) increased to 9.63% from 5.67%

Early this month Rio Tinto ((RIO)) decided to close its mineral sands operation in Madagascar for two months, citing weak market conditions. The impact flowed through to Iluka, the shares of which have since fallen. Iluka sits at number 11 on the Top 20.

Shorts in FKP Property increased to 6.26% from 3.49%

See above.

Shorts in Atlas Iron increased to 6.29% from 3.42%

See above.

Shorts in Paladin Energy increased to 8.19% from 5.34%

While shorts in Paladin decreased last week on a weekly basis, the stock remained a shorters favourite over the month on a soggy spot uranium price and cash burning from the miner.

Shorts in Fairfax Media ((FXJ)) increased to 11.10% from 8.45%

Fairfax shares actually rose over the month on October but the shorters remain unconvinced, likely retaining a position against old media that sees FXJ at number 7 in the Top 20.

Shorts in Whitehaven Coal ((WHC)) increased to 8.01% from 5.38%

Whitehaven shares have been on the slide all month. The company has tended to pop in and out of the bottom end of the Top 20 table of late as a bet against WHC receiving Maules Creek approval and/or a longer term trade against coal.

Shorts in News Corp increased to 9.62% from 7.07%

See above.

Shorts in Cochlear increased to 15.18% from 12.64%

See above.

Shorts in Boart Longyear ((BLY)) increased to 9.36% from 7.00%

Boart raised funds through a debt issue early in October in attempt to keep the wolves from the door and avoid an equity raising, although at significant interest rate cost. Is it enough? The shorters are not convinced.

Shorts in Sims Metal Management ((SGM)) increased to 5.54% from 3.42%

Sims’ scrap metal peers in the US were reporting their quarterly results over the month and the picture is not a pretty one, suggesting chronic overcapacity.

Monthly Short Decreases

Shorts in Wotif.com ((WTF)) decreased to 3.74% from 7.46%

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. The shorters have seen weakness as an opportunity to cash in on previously established positions.
 

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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