The Short Report

This story features MYER HOLDINGS LIMITED, and other companies. For more info SHARE ANALYSIS: MYR

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 26, 2015.

The week in question saw the ASX200 shoot up towards the 6000 level but fail once more, falling back in a very choppy, volatile fashion. While such volatility would understandably shake shorters into action, we note that all the green on our table below last week has been replaced with a lot of red this week. Most of it is just bracket creep between percentage bands but it is notable that the shorters were generally reducing the week before, which followed the Fed's surprisingly dovish policy statement, but increasing again last week as Fed impact waned.

Our 10% plus shorted club has grown back to ten members from six the week before. Three of the four are familiar faces but bracket creep has meant Orica has signed up for the first time in the history of this Report. Myer ((MYR)), Metcash ((MTS)) and Monadelphous retain their podium positions while Fortescue Metals ((FMG)) has snuck into fourth place.

The other big mover in the week was biotech Mesoblast, which saw its shorts jump, but then Meso does tend to fly up and down the table fairly regularly.
 

Weekly short positions as a percentage of market cap:

10%+

MYR   17.9
MTS    16.3
MND   14.9
FMG   12.0
MIN    11.8
PRY    11.6
ORI     11.2
UGL    11.1
CDD   10.4
AGO   10.1

In: ORI, UGL, CDD, AGO  

9.0-9.9%

FLT, ACR, KAR, JBH
 
In: ACR, KAR, JBH              Out: ORI, UGL, AGO

8.0-8.9%

MRM, PBG, SGM, SXY, SUL, MSB, ALQ

In: MRM, PBG, SXY, MSB, ALQ    Out: KAR, JBH, CDD

7.0-7.9%

DSH, MGX, WHC, NXT, ILU, JHC, KCN, WOW

In: DSH, MGX, NXT, ILU, JHC, KCN        Out: ALQ, SXY, MRM, PBG, NST

6.0-6.9%

CAB, NWH, TPI, AWE, WOR

In: TPI, AWE                         Out: JHC, NXT, DSH, KCN, MGX, ILU, BCI, RRL

5.0-5.9%

RRL, KMD, ARI, COH, BCI, VOC, ASL, PDN, GNC, NWS, NST, TRS, GWA, SIR, SWM

In: NST, RRL, BCI, KMD, VOC, PDN, GNC, TRS, GWA, SIR, SWM

Out: MSB, TPI, AWE
 

Movers and Shakers

Last week the data suggested Acrux ((ACR)) shorts had plunged from 9.8% to less than 5% without any notable move in share price, prompting me to warn this may just be a blip in the data. Well it appears I may have been right, given Acrux is suddenly back at 9.6% shorted in the week in question.

Cardno ((CDD)) fell out of the 10% plus club last week to 8.6% but is back in this week after a 1.8ppt jump to 10.4%. UGL ((UGL)) and Atlas Iron ((AGO)) also rejoined the 10% club on bracket creep while bracket creep took Orica ((ORI)) into the 10% club for the first time in FNArena Short Report history.

Within the 10% plus club, Mineral Resources ((MIN)) was the big mover in the week with a 1.7ppt rise to 11.8%, and fifth most shorted position, from 10.1%, following a little bit of share price strength. From 5% to 10% plus, our short table is unsurprisingly littered with iron ore miners and the companies which service them.

Gold miner Northern Star Resources ((NST)) shot into our table from nowhere the week before but last week saw those shorts drop back by 1.8ppt to 5.3% from 7.1%.

From a completely different sector, Mesoblast ((MSB)) shorts jumped 2.4ppt in the week to 8.0% from 5.6%. The stem cell hopeful often flies around our table but rarely leaves.

To view ASIC's more comprehensive short tables, click here. [Please note, while daily and weekly ASIC data appear up to date, monthly data do not.]
 

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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