The Short Report

Array
(
    [0] => Array
        (
            [0] => ((DSH))
            [1] => ((MYR))
            [2] => ((HVN))
            [3] => ((JBH))
            [4] => ((BCI))
            [5] => ((MND))
            [6] => ((BKN))
            [7] => ((BLY))
            [8] => ((MIN))
            [9] => ((SGM))
            [10] => ((MTS))
            [11] => ((RGF))
            [12] => ((PDN))
        )

    [1] => Array
        (
            [0] => DSH
            [1] => MYR
            [2] => HVN
            [3] => JBH
            [4] => BCI
            [5] => MND
            [6] => BKN
            [7] => BLY
            [8] => MIN
            [9] => SGM
            [10] => MTS
            [11] => RGF
            [12] => PDN
        )

)

This story features MYER HOLDINGS LIMITED, and other companies.
For more info SHARE ANALYSIS: MYR
The company is included in ASX300 and ALL-ORDS

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 October 9, 2014.

Last week saw the ASX200 make some attempt to consolidate and hold the 5300 level after the month's big sell-off, but as today's levels indicate, this proved to no avail. However this brief glimpse of stability did have the effect of sparking quite a lot of action on the shorting front, both increases and decreases, as the seas of red and green below would attest.

The big short increases of the previous week among the consumer discretionary sector were reversed last week, with shorts dropping in Dick Smith, Myer and Harvey Norman. Some bargain hunting among the iron ore juniors saw shorts trimmed for BC Iron, while the mining services sector continues to be a somewhat tedious playground for the shorters as each week brings swings back and forward. Metcash continues to move up among the most popularly shorted stocks while Retail Food Group has suddenly drawn some shorting attention and leapt back up into the table. Elsewhere on our table, there was an awful lot of bracket creep going on.

Weekly short positions as a percentage of market cap:

10%+

MYR   16.5
ACR    14.1
MTS    12.7
JBH     12.3
COH   11.0
AGO   10.8
PDN    10.5
NXT    10.0

In: PDN          Out: DSH, NWS

9.00-9.99%

NWS, RRL, FMG, UGL

In: NWS, FMG                       Out: PDN, MND

8.00-8.99%

ILU, MIN, WHC, KAR, CAB, TRS

In: MIN, WHC, CAB             Out: FMG

7.00-7.99%

MND, KCN, DSH, SGM, RFG

In: DSH, MND, SGM, RFG              Out: MIN, WHC, CAB, BCI

6.00-6.99%

MSB, WSA, ALQ, VET, CRZ, PBG, ASL

In: CRZ                       Out: SGM, BKN, LYC, BDR, FLT, NUF

5.00-5.99%

FLT, EVN, BCI, LYC, BKN, MML, BDR, NUF, DOW, TEN, BRU, BLY, OZL, SXL

In: BCI, BKN, LYC, BDR, FLT, NUF, EVN, MML, BLY, OZL   Out: CRZ, VRT

Movers and Shakers

It would appear that in the previous week, someone executed a big short in the consumer discretionary sector and on the subsequent market-wide sell-off, reversed those positions last week. Last week we saw Dick Smith Holdings ((DSH)) shorts drop 5.1ppt to 7.4% from 12.5%, Myer ((MYR)) shorts drop 1.4ppt to 16.5% from 17.9%, and Harvey Norman ((HVN)) shorts fall 1.5ppt from 2.7% from 4.2%, all of which represent reversals of trades from the week before.

The only sector member which didn’t reverse from the week before was JB Hi-Fi ((JBH)) which maintained its short level.

Junior iron ore miners have been trying to consolidate recently following steep falls, and this week saw some sharp short-covering bounces on a big single-session jump in the iron ore price. But last week saw BC Iron ((BCI)) shorters presumably squaring up, with a 2.2ppt fall to 5.6% from 7.8%.

Here is an excerpt from last week’s Report:

Fun and games continue in the mining services sector where pairs trading is a popular pursuit. Last week Monadelphous ((MND)) saw its shorts rise by 1.5ppt to 9.9% from 8.4% while on the other side of the equation, Bradken ((BKN)) shorts fell 1.5ppt to 6.5% from 8.0% and Boart Longyear ((BLY)) disappeared out of our 5% plus table with a 1.2ppt fall to 4.8% from 6.0%.

Well this week saw shorts decrease for both Mona, down 2.0ppt to 7.9% from 9.9%, and Bradken, down 1.0ppt to 5.5% from 6.5%, while Boart snuck back up into the table with a slight rise. The mining services sector remains a popular plaything. Last week Mineral Resources ((MIN)) continued its steady climb up the table with a 1.0ppt increase in shorts to 8.7% from 7.7%.

Sims Metal Management ((SGM)), which is beholden to metal prices in its recycling business, saw its shorts rise 1.0ppt to 7.4% from 6.4%.

Food was in focus last week. With competition concerns surrounding Metcash ((MTS)), not just from the two majors but also from the growing discount chains, six of eight FNArena database brokers now have Sell or equivalent ratings on the stock. Metcash moved further up the elite 10% table last week with a 1.1ppt increase in shorts to 12.7% from 11.6%.

Meanwhile Retail Food Group ((RGF)), owner of pizza, patisserie, doughnut and coffee chains, has been flirting around the periphery of the 5% plus table for a while now but last week saw its shorts jump 2.2ppt to 7.1% from 4.9%.

Finally, Paladin Energy ((PDN)) dropped out of the 10% plus club the week before last, presumably given a rising uranium price. The price rise has not translated into a rise for PDN’s share price however, so last week PDN jumped back up into the 10% plus club with a 1.3ppt gain to 10.5% from 9.2%.

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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