The Short Report

Array
(
    [0] => Array
        (
            [0] => ((NWS))
            [1] => ((YAL))
            [2] => ((KCN))
            [3] => ((HFA))
            [4] => ((BLY))
            [5] => ((DSH))
            [6] => ((BKN))
            [7] => ((WSA))
            [8] => ((APN))
            [9] => ((PPT))
            [10] => ((FXJ))
            [11] => ((SEK))
            [12] => ((SGT))
            [13] => ((CPA))
            [14] => ((CAB))
            [15] => ((PBG))
            [16] => ((QAN))
            [17] => ((PRU))
            [18] => ((JBH))
            [19] => ((ACR))
            [20] => ((MYR))
            [21] => ((DJS))
            [22] => ((SLR))
            [23] => ((SDL))
            [24] => ((AZJ))
            [25] => ((DXS))
        )

    [1] => Array
        (
            [0] => NWS
            [1] => YAL
            [2] => KCN
            [3] => HFA
            [4] => BLY
            [5] => DSH
            [6] => BKN
            [7] => WSA
            [8] => APN
            [9] => PPT
            [10] => FXJ
            [11] => SEK
            [12] => SGT
            [13] => CPA
            [14] => CAB
            [15] => PBG
            [16] => QAN
            [17] => PRU
            [18] => JBH
            [19] => ACR
            [20] => MYR
            [21] => DJS
            [22] => SLR
            [23] => SDL
            [24] => AZJ
            [25] => DXS
        )

)

This story features NEWS CORPORATION, and other companies.
For more info SHARE ANALYSIS: NWS
The company is included in 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 26, 2014.

Shorting activity continued to reflect company profit result responses and kick-ons from those responses last week, with the net positive season conspiring to produce a lot more short reductions than increases. Six short increases of one percentage point or more met eleven decreases, with increases still focused on miners and mining services, along with relative newcomer Dick Smith. Show me a bricks & mortar retailer and I'll show you immediate short interest. Decreases included profit result upside surprisers such as Seek, Perpetual, Fairfax and Cabcharge, along with some share placement arbitrage play in the likes of Western Areas for one.

Eight monthly short increases of 2ppt or more met seven decreases with many names repeated from the weekly list.

Fairfax has dropped out of the Top 20! The company would have been forced to surrender its member's pass.

Note the Top 20 list continues to include positions for both ETFs and non-ordinary shares of News Corp ((NWS)) and Yancoal ((YAL))  which do not reflect true short interest.
 

Weekly Short Increases

Shorts in Kingsgate Consolidated ((KCN)) increased to 8.33% from 5.56%

Short interest in Kingsgate has been rekindled in the wake of the company’s result which showed a fall in cash balance and increase in gearing. Kingsgate's funding capacity with regard its development plans is becoming less viable as the months go past. The shorters smell a raising.

Shorts in HFA Holdings ((HFA)) increased to 2.61% from 0.00%

HFA’s share price fell in the wake of its result but the coverage is not being updated from FNArena database brokers.

Shorts in Boart Longyear ((BLY)) increased to 9.26% from 7.57%

Boart’s weak result shocked no one but even though the company has avoided covenant breaches, its outlook remains challenged. A strategic review is underway and might involve capital restructuring. Five of seven FNArena brokers rate BLY a Sell.

Shorts in Dick Smith Holdings ((DSH)) increased to 4.23% from 2.64%

Brokers like Dick but for the stoic band of bricks & mortar retail shorters, Dick’s listing represented a new toy in the toy box. A prospectus-beating result failed to stir up market excitement.

Shorts in Bradken ((BKN)) increased to 12.40% from 11.40%

Bradken reported early in February to a dour response and has since had an attempted acquisition fail. While now well de-rated, BKN is not looking at any real earnings growth and has for some time been a shorter’s favourite. BKN has moved to 9 from 11 on the Top 20 shorted list.

Weekly Short Decreases

Shorts in Western Areas ((WSA)) decreased to 8.65% from 14.10%

Western Areas posted a decent result last month but also completed a share placement. This big reduction in shorts, dropping WSA to 19 from 7 on the Top 20, represents the closing trade on a placement play.

Shorts in APN News & Media ((APN)) decreased to 1.22% from 3.67%

APN announced the acquisition of the remaining stakes in its radio assets during the period which was well received by brokers and the market.

Shorts in Perpetual ((PPT)) decreased to 2.57% from 4.83%

Perpetual was for some time seemingly a perpetual loser even as the stock market rose all last year but last month’s solid result represented a turnaround for the fund manager, and along with the earlier Trust Co acquisition, and the stock has risen ever since.

Shorts in Fairfax Media ((FXJ)) decreased to 8.30% from 10.52%

Fairfax shocked the nation at its result release by reporting an increase in earnings and a lift in dividend. Soon dogs will be laying down with cats. This reduction sees FXJ depart the Top 20 from its previous 14 position and possibly a loss of member’s pass.

Shorts in Seek ((SEK)) decreased to 1.29% from 3.13%

The odds were against Seek posting a strong profit result given the weakening employment situation in Australia, but it’s hard to keep a good online pioneer down. Seek’s stock price has skyrocketed since.

Shorts in Singapore Telecom ((SGT)) decreased to 4.35% from 6.02%

SingTel shorts fluctuate with tedious regularity without noticeable reason beyond perhaps a telco pairs trade. An announced restructure of the Singapore business has prompted a share price rally since a reasonable quarterly result.

Shorts in Commonwealth Property Office ((CPA)) decreased to 0.18% from 1.64%

Going, going…Comm Property will soon be swallowed up by a consortium led by Dexus.

Shorts in Cabcharge ((CAB)) decreased to 9.12% from 10.51%

A surprisingly positive result prompted a jump in Cabcharge shares last month but CAB has only managed to move down to 17 from 16 on the Top 20 with a regulatory cloud still engulfing the company.

Shorts in Pacific Brands ((PBG)) decreased to 0.73% from 2.01%

Pacific posted a very weak result and its shares have tumbled steadily since, allowing shorters to cash in.

Shorts in Qantas ((QAN)) decreased to 2.48% from 3.62%

A pending change to the Qantas Sale Act (now confirmed) provided less reason to be short Qantas.

Shorts in Perseus Mining ((PRU)) decreased to 1.90% from 3.00%

Perseus has completed a placement which would have allowed some shorters to close their positions.

Monthly Short Increases

Shorts in Kingsgate Consolidated increased to 8.33% from 4.31%

See above.

Shorts in JB Hi-Fi ((JBH)) increased to 11.48% from 8.59%

See Dick Smith. As long as there is a JB Hi-Fi there will be JBH shorters who one day might cash in on a weak result from the company, if that day ever comes. This increase nevertheless only moves JBH up one place to 11 on the Top 20.

Shorts in HFA Holdings increased to 2.61% from 0.00%

See above.

Shorts in Acrux ((ACR)) increased to 8.90% from 6.44%

Acrux’ primary product is under review from the US FDA, putting the company’s earnings outlook in doubt.

Shorts in Dick Smith Holdings increased to 4.23% from 1.93%

See above.

Shorts in Myer ((MYR)) increased to 13.67% from 11.55%

Myer shorts have been rising since it was revealed the company had gone cap in hand to its rival David Jones ((DJS)) for merger talks. MYR moves up to 8 from 9 on the Top 20.

Shorts in Boart Longyear increased to 9.26% from 7.17%

See above.

Shorts in Silver Lake Resources ((SLR)) increased to 6.84% from 4.75%

Silver Lake announced a capital raising last month and last week announced it would close down its Murchison project to concentrate on its Mt Monger project.

Weekly Short Decreases

Shorts in Western Areas decreased to 8.65% from 13.17%

See above.

Shorts in Sundance Resources ((SDL)) decreased to 1.85% from 5.89%

Sundance issued convertible notes to help fund its Mbalam-Nabeba project and has received a positive response to its infrastructure tender.

Shorts in Cabcharge decreased to 9.12% from 12.05%

See above.

Shorts in Fairfax Media decreased to 8.30% from 10.69%

See above.

Shorts in Perpetual decreased to 2.57% from 4.89%

See above.

Shorts in Aurizon ((AZJ)) decreased to 0.45% from 2.73%

Aurizon shares have risen steadily since a solid result which featured better than expected cost cutting from the company.

Shorts in Dexus Property ((DXS)) decreased to 0.29% from 2.29%

Dexus is close to completing its acquisition of Commonwealth Property.
 

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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