The Short Report

Array
(
    [0] => Array
        (
            [0] => ((ACR))
            [1] => ((MTS))
            [2] => ((AGO))
            [3] => ((COH))
            [4] => ((ALQ))
            [5] => ((BKN))
            [6] => ((MIN))
            [7] => ((VET))
            [8] => ((SGM))
        )

    [1] => Array
        (
            [0] => ACR
            [1] => MTS
            [2] => AGO
            [3] => COH
            [4] => ALQ
            [5] => BKN
            [6] => MIN
            [7] => VET
            [8] => SGM
        )

)

This story features ACRUX LIMITED, and other companies.
For more info SHARE ANALYSIS: ACR

Guide:

The Short Report draws upon data provided by the Australian Securities & Investment Commission (ASIC) to highlight significant weekly moves in short positions registered on stocks listed on the Australian Securities Exchange (ASX). Short positions in exchange-traded funds (ETF) and non-ordinary shares are not included. Short positions below 5% are not included in the table below but may be noted in the accompanying text if deemed significant.

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.

Stock codes highlighted in green have seen their short positions reduce in the week by an amount sufficient to move them into a lower percentage bracket. Stocks highlighted in red have seen their short positions increase in the week by an amount sufficient to move them into a higher percentage bracket. Moves in excess of one percentage point or more are discussed in the Movers & Shakers report below.

Summary:

Week ending August 28, 2014.

Last week was the final week of the August result season and there was thus more moving and shaking going on among short positions. We might see things quieten down this week.

Cochlear's slide down the most shorted table continues a-pace, with the long term number one not even achieving a podium finish last week! Cochlear is now in fourth place with shorts of 12.6%, which is far cry from the heady pre-result days in the seventeens. As the iron ore price continues to plunge, Atlas Iron consolidates its number one position. Atlas saw a slight tick-up in shorts post result to 15.9% and holds its ground above Acrux ((ACR)) at 14.5% and Metcash ((MTS)) at 13.1%. There was otherwise not much movement among the 10% plus club last week.

Except from Bradken, which fell right down into the 8% band, joining fellow mining service providers ALS and Mineral Resources with notable short reductions. On the short increase side, Vocation continues to attract short interest despite an maiden earnings beat.

Weekly short positions as a percentage of market cap:

10%+

AGO   15.9
ACR    15.3
MTS    13.1
COH   12.6
MYR   12.4
JBH     12.1
NWS   11.5
PDN    10.3
TRS     10.1

Out: BKN, NXT

9.00-9.99%

NXT, ILU, CAB

In: NXT                      Out: DSH, ALQ

8.00-8.99%

BKN, RRL, DSH, UGL, KAR

In: BKN, DSH, UGL, KAR              Out: MND, MIN, WHC

7.00-7.99%

MND, WHC, ASL, BLY, NUF, MSB, FMG, VET

In: MND, WHC, NUF, VET              Out: UGL, KAR

6.00-6.99%

MIN, ALQ, SGM, WSA, MTU, BRU, VRT

In: ALQ, MIN, SGM, VRT               Out: SGT

5.00-5.99%

SGT, OZL, LYC, FLT, TEN, GNC, RFG, GWA, SPL

In: SGT, RFG                         Out: VET, SGM, VRT, IVC

Movers and Shakers

Atlas Iron ((AGO)) reported last week and unlike some mining-related and well-shorted stocks, did not surprise to the upside and set off a short-covering scramble. Rather, shorts crept back up to 15.9% from 15.6% and AGO retains its position as number one most shorted stock in the market. By contrast, long term incumbent Cochlear ((COH)) continues to slide down the table, albeit not yet beyond the elite 10% plus club. Last week COH shorts fell another 2.5ppt to 12.6% from 15.1%, dropping the stock to fourth position.

ALS ((ALQ)) does not report in August and its shares have gone nowhere much of late but short positions in ALQ suddenly dropped 2.5ppt to 6.5% from 9.0% last week. Perhaps shorters are generally becoming a little more nervous about their positions in mining services stocks in general, given many of those reporting drew “may have seen the worst” commentary from analysts. Last week Bradken ((BKN)) shorts dropped 1.8ppt to 8.8% from 10.6% and Mineral Resources ((MIN)) shorts dropped 1.4ppt to 6.9% from 8.3%.

It was left to Industrials to make up the numbers on the short increase side. Listed newbie Vocation ((VET)) posted a solid beat with its maiden result and enjoyed a rally as a result, buy this high-flyer has been attracting increasing interest from the shorters. VET shifted further up the short table last week with a 1.1ppt increase to 7.0% from 5.9%.

Sims Metal Management ((SGM)) has been bouncing around at the low end of the 5% plus table for a while now, and last week posted a miss on its earnings result. The shorters smelt blood and increased SGM positions by 1.1ppt to 6.3% from 5.2%.

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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