The Short Report

Array
(
    [0] => Array
        (
            [0] => ((JBH))
            [1] => ((NST))
            [2] => ((PRU))
            [3] => ((WEB))
            [4] => ((MYR))
            [5] => ((TRS))
            [6] => ((UGL))
            [7] => ((AZJ))
            [8] => ((AGO))
            [9] => ((SDL))
            [10] => ((FGE))
            [11] => ((ISU))
            [12] => ((OZL))
            [13] => ((BKN))
        )

    [1] => Array
        (
            [0] => JBH
            [1] => NST
            [2] => PRU
            [3] => WEB
            [4] => MYR
            [5] => TRS
            [6] => UGL
            [7] => AZJ
            [8] => AGO
            [9] => SDL
            [10] => FGE
            [11] => ISU
            [12] => OZL
            [13] => BKN
        )

)

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, January 30, 2013.

The shorters returned ahead of the results season, affecting seven weekly short increases of one percentage point or more to only two decreases. JB Hi-Fi returned to the Top 20 shorted table after a hiatus at number 12 but shorters would have again been caught out by this week's strong profit result. The Reject Shop jumped into the cross-hairs following its shock profit warning while elsewhere the names were all too familair.

Monthly increases of 2ppt or more numbered four, to two decreases, with embattled Forge Group making an unsurprising return but OZ Minerals still enjoying the impact of its strong production report.

Weekly Short Increases

Shorts in JB Hi-Fi ((JBH)) increased to 11.70% from 7.82%

Once a long term resident of the Top 20 shorted, JBH had in recent months slipped off the table as the company continued to confound the non-believers with solid results on a difficult retail environment. The general January sell-off sent JBH shares tumbling but sales guidance affected a bounce in the week in question. JBH jumped back in the table at number 12 last week, then this week posted another strong result.

Shorts in Northern Star Resources ((NST)) increased to 2.13% from 0.58%

Last week Northern acquired a 51% stake in another two of Barrick’s gold projects. The one broker covering the stock considered the price full but the opportunity valuable. NST shares dived on the news.

Shorts in Perseus Mining ((PRU)) increased to 2.91% from 1.38%

Perseus’ quarterly production report released last week showed improvement at Edikan, although brokers remain cautious over rising costs and a volatile gold price.

Shorts in Webjet ((WEB)) increased to 3.69% from 2.48%

Webjet shares have been on the slide since the company announced higher than expected integration costs for its Zuji acquisition. WEB reports next week.

Shorts in Myer ((MYR)) increased to 12.46% from 11.44%

News of Myer’s merger approach to David Jones had not yet broken last week but the stock is a perennial shorter’s favourite and this increase merely took it to number 10 from number 11 in the Top 20.

Shorts in The Reject Shop ((TRS)) increased to 7.15% from 6.15%

The once high-flying Reject Shop issued a profit warning last week which was roundly rejected by the market. The shorters have chased it down. TRS sits just outside the Top 20 shorted.

Shorts in UGL ((UGL)) increased to 13.84% from 12.84%

Another shorter’s favourite, with a profit result release approaching, UGL has moved up to number 7 in the Top 20 from number 8.

Weekly Short Decreases

Shorts in Aurizon ((AZJ)) decreased to 0.69% from 2.77%

Aurizon’s quarterly, released last week, showed a strong increase in coal haulage volumes, prompting brokers to suggest a guidance upgrade may be forthcoming at the company’s result release.

Shorts in Atlas Iron ((AGO)) decreased to 8.09% from 9.32%

Atlas’ share price had been on the slide in line with weaker iron ore prices up until last week, when its quarterly showed record shipments. Atlas has slipped to number 18 from number 15 in the Top 20.

Monthly Short Increases

Shorts in Sundance Resources ((SDL)) increased to 6.12% from 1.07%

Sundance has received strong interest for infrastructure contracts at its significant iron ore project but the company will need to raise fresh equity in order to secure funding.

Shorts in JB Hi-Fi increased to 11.70% from 7.31%

See above.

Shorts in Forge Group ((FGE)) increased to 5.07% from 2.03%

Forge has proven a popular short play since its catastrophic profit warning and another warning was issued last week.

Shorts in iSelect ((ISU)) increased to 2.15% from 0.2%

iSelect rose strongly in December after Credit Suisse defended the company’s prospects, but slid again in the general January sell-off.

Monthly Short Decreases

Shorts in OZ Minerals ((OZL)) decreased to 4.73% from 6.99%

OZ released a December quarter production report during the period which surprised all and sundry to the upside, sparking a big share price jump and some pain for the shorters.

Shorts in Bradken ((BKN)) decreased to 10.21% from 12.29%

Bradken shares fell steadily over the month but this reduction only takes this popular shorting stock down to number 14 on the Top 20 from number 13.
 

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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