The Short Report

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(
    [0] => Array
        (
            [0] => ((PDN))
            [1] => ((SWM))
            [2] => ((MYR))
            [3] => ((MGX))
            [4] => ((ASL))
            [5] => ((NWS))
            [6] => ((VRT))
            [7] => ((IIN))
        )

    [1] => Array
        (
            [0] => PDN
            [1] => SWM
            [2] => MYR
            [3] => MGX
            [4] => ASL
            [5] => NWS
            [6] => VRT
            [7] => IIN
        )

)

This story features PALADIN ENERGY LIMITED, and other companies.
For more info SHARE ANALYSIS: PDN
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 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 March 12, 2015.

With the February result season beginning to fade into the distance, shorting activity on the ASX has begun to settle into a more normal pattern following the sharp moves during and after the six-monthly volatility-fest. Over the week in question, the ASX200 saw some weakness but has since recovered.

While there appears to be a lot of red on our table this week and a bit of green, most of the moves are the result on bracket creep on small percentage changes. A couple of exceptions are the ever rising Mt Gibson Iron, the reappearance of News Corp in the table, and short reductions for Ausdrill and Virtus Health following big increases the week before. A familiar face in Paladin Energy ((PDN)) has also snuck into the low end of the table, as has newcomer Seven West Media ((SWM)).

The "oops" award for the week goes to those who increased iiNet shorts to 6.2% from 5.2% during the week ahead of TPG Telecom's subsequent takeover bid.

At the top of the table there was no movement in the week bar a couple of shuffled rankings in the 10% plus club, and we note Myer ((MYR)) shorts are back over 20% ahead of today's result release which, blow me down, is a bit of a shocker. Myer shares are down 6% this morning in a very strong market with no sign the shorters are going to cash in ahead of what they probably assume will be the department store's ultimate demise.
 

Weekly short positions as a percentage of market cap:

10%+

MYR   20.1
MTS    13.5
UGL    11.7
FMG   11.5
PRY    11.4
AGO   10.6
MIN    10.5
CDD   10.4

No changes

9.0-9.9%

ACR, MND, PBG, KAR, FLT, ORI

In: MND, FLT, ORI              

8.0-8.9%

SXY, SGM, MRM, JBH, ALQ, MGX, NXT, BCI

In: MGX                    Out: MND, FLT, ORI, ASL, WHC

7.0-7.9%

WHC, JHC, KCN, SUL, MSB, DSH, CAB, ILU

In: WHC, CAB, ILU              Out: MGX

6.0-6.9%

ASL, WOW, NWH, NWS, IIN, AWE, COH, RRL, VRT

In: ASL, NWS, IIN, AWE                 Out: CAB, ILU, RRL, VRT

5.0-5.9%

TPI, ARI, RRL, BDR, VOC, TRS, TEN, GNC, KMD, SWM, PDN, VRT, SIR

In: RRL, VRT, SWM, PDN

Out: IIN, AWE
 

Movers and Shakers

Mt Gibson Iron ((MGX)) has an advantage over most of its junior iron ore peers in that it carries a not insignificant cash balance, proving a buffer against falling iron ore prices. However, like its popularly shorted peers Fortescue Metals, on 11.5% shorted, Atlas Iron on 10.6% and BC Iron on 8.0%, Mt Gibson is burning cash at current iron ore prices. Thus the stock trades below its cash value and is drawing more short attention, with an increase of 1.0ppt in the week in question to 8.2% from 7.2%.

Mt Gibson also saw a big jump the week before.

A recent report from Morgan Stanley suggested gold mining services provider Ausdrill ((ASL)) is a quality company merely suffering from tough market conditions, and could be a target for US peers looking to exploit a strong dollar and acquire solid franchises at the bottom of the cycle. Ausdrill shorts fell 1.1ppt in the week in question to 6.9% from 8.0%, having jumped up the week before.

News Corp ((NWS)) disappeared off our table the week before, suggesting its short positions had fallen to below 5%, but without any new news on News and little stock price movement the once short table stalwart is back again, with a big jump to 6.2% shorted.

Virtus Health’s ((VRT)) result posted late in February underwhelmed the market and the stock price has drifted lower ever since, despite brokers suggesting the weakness is overdone. The shorters appear to have been cashing in on this weakness, given Virtus shorts have fallen 1.0ppt to 5.0% from 6.0%, having jumped up the week before.

iiNet ((IIN)) is now the subject of a takeover offer from TPG Telecom but the announcement came after the week in question. There'll be some shorters thus kicking themselves given iiNet shorts rose 1.0ppt to 6.2% from 5.2%.
 

To view ASIC's more comprehensive short tables, click here.
 

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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