The Short Report

Array
(
    [0] => Array
        (
            [0] => ((MYR))
            [1] => ((MTS))
            [2] => ((DSH))
            [3] => ((JBH))
            [4] => ((GXL))
            [5] => ((MRM))
            [6] => ((MND))
            [7] => ((UGL))
            [8] => ((WOR))
            [9] => ((NWH))
            [10] => ((SXY))
            [11] => ((MIN))
            [12] => ((MGX))
            [13] => ((AGO))
            [14] => ((AWC))
            [15] => ((PRG))
            [16] => ((SKE))
        )

    [1] => Array
        (
            [0] => MYR
            [1] => MTS
            [2] => DSH
            [3] => JBH
            [4] => GXL
            [5] => MRM
            [6] => MND
            [7] => UGL
            [8] => WOR
            [9] => NWH
            [10] => SXY
            [11] => MIN
            [12] => MGX
            [13] => AGO
            [14] => AWC
            [15] => PRG
            [16] => SKE
        )

)

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 July 30, 2015.

Last week saw the ASX200 fall from its 5700 barrier once more before recovering to have another shot. But the market move was of less relevance last week than the fact it was the last week before the August result season began.

The shorters, it would seem, started to suffer a little from cold feet in the mining and energy services sector in particular. We saw short positions trimmed by more than a percentage point for all of MMA Offshore, Monadelphous, UGL, WorleyParsons and NRW Holdings.

Amongst the resource sector names themselves, a little spike in the iron ore price saw shorts drop for Mineral Resources and Mt Gibson Iron, while having returned from a three month trading halt to plunge to 3c, Atlas Iron flew right out of our table from 10% plus to oblivion as shorters cashed in their long-awaited spoils. Senex Energy saw a decent drop in the gas space.

Alumina Ltd went the other way.

Retailers were also in the frame, with shorters trimming hefty positions in top markers Myer and Metcash while ticking up shorts in Dick Smith, JB Hi-Fi and Greencross.

Programmed Maintenance has also come to the end of its takeover arbitrage play.
 

Weekly short positions as a percentage of market cap:

10%+

MYR   19.7
MTS    18.8
ORI     15.6
CAB    12.5
SGH    12.1
MRM  12.0
MND   11.4
PRY    11.1
FLT     10.7
MIN    10.6

Out: UGL, WOR, FMG, AGO

9.0-9.9%

FMG, UGL, DSH
 
In: FMG, UGL, DSH             Out: SXY, CDD        

8.0-8.9%

GEM, WOR, CDD

In: WOR, CDD, GXL                        Out: DSH, MGX, PRG, WOW, NWH

7.0-7.9%

WOW, GWA, SEK, SXY, SUL, KAR, AWE, IGO, MSB, JBH

In: WOW, SXY, AWE, IGO, JBH                Out: GXL, NXT, KCN, WHC

6.0-6.9%

AWC, NXT, KCN, DOW, WHC, JHC

In: NXT, KCN, WHC, AWC            

Out: AWE, IGO, JBH, PDN, ILU, SGN, ACR, SGM, SWM

5.0-5.9%

NWS, SGN, SPO, ARI, ILU, PDN, CAR, SWM, NEC, SYR, BPT, TFC, ALQ, PBG, MGX, BCI, TEN, PRG

In: PRG, SGN, ILU, PDN, SWM, ALQ                   Out: AWC, STO, TRS, OFX

Movers and Shakers

The top of the table did not change last week but Myer ((MYR)) lost 1.0 percentage points of short position to 19.7% and Metcash ((MTS)) lost 1.3ppt to 18.8%. The flipside appears to be smaller ticks up in shorts for all of Dick Smith ((DSH)), JB Hi-Fi ((JBH)) and Greencross ((GXL)).

Shorters have been carrying many of the mining/energy service names for a very long time and maybe they have begun to feel low expectations might lead to some upside surprise among the results. Whatever the case, MMA Offshore ((MRM)) lost 1.3ppt to 12.0% last week, Monadelphous ((MND)) lost 2.5ppt to 11.4%, UGL ((UGL)) lost 1.1ppt to 9.8% and WorleyParsons ((WOR)) lost 2.4ppt to 8.3%.

NRW Holdings ((NWH)) was a strange one, dropping from 8.1% to out of our 5% plus table despite any new news of note or significant share price movement.

June quarter production reports updates may have had something to do with it but perennial takeover possibility Senex Energy ((SXY)) saw its shorts fall 2.4ppt to 7.3%, while Mineral Resources ((MIN)) fell 2.2ppt to 10.6% and Mt Gibson ((MGX)) fell a full 3.5ppt to 5.2%, with the iron ore price having spiked just a little.

No questions about longstanding top of the table stalwart Atlas Iron ((AGO)), which returned from a three month trading halt to plunge to 3c from 12c and allowed patient shorters to cash in. Atlas fell from 10.0% to right off the 5% plus table.

Alumina Ltd ((AWC)) bucked the general trend in seeing its shorts rise 1.1ppt to 6.9% following a good quarterly report from Alcoa and a bit of a boost in share price. The shorters likely aren’t that keen on alumina/aluminium prices ahead.

Finally, Programmed Maintenance ((PRG)) has been the victim of a typical takeover arbitrage play but with the Skilled Group ((SKE)) merger progressing, and PRG shares having seemingly reached a nadir, the shorts cashed in. Programmed’s shorts fell 3.3ppt from 8.2% to just out of our table at 4.9%.
 

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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