The Short Report

Array
(
    [0] => Array
        (
            [0] => ((PRU))
            [1] => ((KCN))
            [2] => ((DJS))
            [3] => ((PDN))
            [4] => ((JBH))
            [5] => ((NWS))
            [6] => ((SEK))
            [7] => ((MPO))
            [8] => ((NUF))
            [9] => ((FXJ))
            [10] => ((MYR))
            [11] => ((SLR))
            [12] => ((CAB))
            [13] => ((OZL))
            [14] => ((AZJ))
            [15] => ((GWA))
        )

    [1] => Array
        (
            [0] => PRU
            [1] => KCN
            [2] => DJS
            [3] => PDN
            [4] => JBH
            [5] => NWS
            [6] => SEK
            [7] => MPO
            [8] => NUF
            [9] => FXJ
            [10] => MYR
            [11] => SLR
            [12] => CAB
            [13] => OZL
            [14] => AZJ
            [15] => GWA
        )

)

This story features PERSEUS MINING LIMITED, and other companies.
For more info SHARE ANALYSIS: PRU
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, February 20, 2013.

The week before last featured heavy short covering as the market in general surged, and as individual companies reported some positive earnings results. Last week the ASX200 stalled at its highs but we were very deep into the results releases. Short activity thus dropped off from the week before and was more company specific. Four short increases of one percentage point or more met six decreases, with cash-strapped miners featuring among the increases and positive shock profit reporters, such as Seek and Fairfax, appearing among the decreases.

Three monthly short increases of 2ppt or more met five decreases. Myer is back in the shorters' sights following its approach to David Jones while on the other side of the equation, OZ Minerals shorts continue to fall following the company's well received production/profit results.

Note that EFTs and News Corp related securities still dominate the Top 20 table but are not relevant in terms of market views.
 

Weekly Short Increases

Shorts in Perseus Mining ((PRU)) increased to 2.88% from 1.40%

Perseus reported a slightly better than expected result during the week but followed it up with a share placement which may suggest a short increase on the arbitrage opportunity.

Shorts in Kingsgate Consolidated ((KCN)) increased to 5.85% from 4.58%

Kingsgate’s weak result during the week did nothing to dispel concerns the company’s debt obligations mean the capacity to find growth plans is in doubt. A reluctant capital raising is likely in the sights of the shorters.

Shorts in David Jones ((DJS)) increased to 6.58% from 5.40%

DJs quarterly sales result showed some improvement but not enough to convince brokers of any return to strength. The approach from Myer for a merger has also helped push up DJs’ share price and the shorters sense more potential from this former shorting favourite.

Shorts in Paladin Energy ((PDN)) increased to 9.34% from 8.24%

Paladin has now done everything it can to stay alive and the announced closure of the Kayelekera mine provided a share price spurt, but until the uranium price rebounds PDN will continue to burn cash.

Weekly Short Decreases

Shorts in JB Hi-Fi ((JBH)) decreased to 11.33% from 13.53%

JB shorts built up again following another strong result earlier in the month, as is evident in the monthly short increase noted below. The share price then dipped before recovering once more so perhaps a shorter or two took profits. JBH has fallen to number 12 on the Top shorted list from number 7.

Shorts in News Corp ((NWS)) decreased to 13.65% from 15.33%

Short positions in News Corp are overshadowed by the mechanics of the post spin-off restructure of securities and may not have any relevance to market view.

Shorts in Seek ((SEK)) decreased to 1.70% from 3.29%

Seek posted its result just at the end of the week in question and blew everyone, no doubt including bruised shorters, away.

Shorts in Molopo Energy ((MPO)) decreased to 0.13% from 1.65%

No FNArena broker covers Molopo but we can note this is a straight reversal of the short increase of the week before, with the share price having gone nowhere in between.

Shorts in Nufarm ((NUF)) decreased to 4.50% from 5.59%

It’s been a volatile month for Nufarm, with the stock first rallying strongly before falling back again in the week in question, perhaps suggesting some short profits being taken. Nufarm’s business is very much beholden to the drought.

Shorts in Fairfax Media ((FXJ)) decreased to 9.56% from 10.62%

Hold the front page, Fairfax released an almost reasonable profit result. The stock sent the share price soaring and some shorters ducking for cover. FXJ remains at number 14 on the Top 20 sorted list, nevertheless.

Monthly Short Increases

Shorts in JB Hi-Fi increased to 11.33% from 7.26%

See above.

Shorts in Myer ((MYR)) increased to 13.50% from 11.18%

Talk over the month has been of the seemingly desperate approach from Myer to David Jones suggesting a merger which would see DJS shareholders benefit a lot more than MYR shareholders could. MYR has moved up to number 9 from 10 on the Top 20.

Shorts in Silverlake Resources ((SLR)) increased to 6.05% from 3.96%

Silverlake shares have rallied over the month in line with the gold price but talk of needing to shut down the Murchison project may have exacerbated short interest, outside of gold price views.

Monthly Short Decreases

Shorts in Cabcharge ((CAB)) decreased to 9.12% from 12.75%

This significant reduction in Cabcharge shorts still only takes it down to number 16 on the Top 20. CAB shares quietly rallied over the month and those who short-covered managed to avoid the share price spike associated with a subsequent positive result release this week.

Shorts in News Corp decreased to 13.65% from 16.67%

See above.

Shorts in OZ Minerals ((OZL)) decreased to 2.64% from 5.58%

OZ shares spiked once on a solid production report and again on the result release which included an unexpected special dividend. Shorters have been covering.

Shorts in Aurizon ((AZJ)) decreased to 0.19% from 3.10%

Aurizon shares have rallied all month, including last week following a better than expected result release.

Shorts in GWA Group ((GWA)) decreased to 1.97% from 4.19%

GWA shares have seen a volatile month but while its result last week was seen as positive by only some brokers, the share price has since rallied.

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.

Technical limitations

If you are reading this story through a third party distribution channel and you cannot see charts included, we apologise, but technical limitations are to blame.

Find out why FNArena subscribers like the service so much: "Your Feedback (Thank You)" – Warning this story contains unashamedly positive feedback on the service provided.

Click to view our Glossary of Financial Terms