The Short Report

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    [0] => Array
        (
            [0] => ((WOW))
            [1] => ((FMG))
            [2] => ((OSH))
            [3] => ((ALQ))
            [4] => ((MRM))
            [5] => ((MND))
            [6] => ((VOC))
            [7] => ((MIN))
            [8] => ((SHV))
            [9] => ((BPT))
        )

    [1] => Array
        (
            [0] => WOW
            [1] => FMG
            [2] => OSH
            [3] => ALQ
            [4] => MRM
            [5] => MND
            [6] => VOC
            [7] => MIN
            [8] => SHV
            [9] => BPT
        )

)

This story features WOOLWORTHS GROUP LIMITED, and other companies.
For more info SHARE ANALYSIS: WOW
The company is included in ASX20, ASX50, ASX100, 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 3, 2016

Last week saw the ASX200 holding its ground around 4900 during the final days of reporting season before beginning its sharp run back through 5000 once more. A quick glance at the 5% plus table below suggests it was a busy week of short activity, mostly of the covering variety, thus adding to the sharpness of the rally.

While most of the movements below represent simple bracket creep, there are some stand-outs.

Mineral Resources, which the week before fell to 11.6% shorted from 16.6% shorted, plunged last week out of the 10% plus table it has graced for so many months, right down to 8.8%.

Woolworths ((WOW)) reported last week, and while it was a shocker, the result was well anticipated and Woolies shares rallied on a “buy the fact”. But over the week Woolies’ shorts increased by 0.4 percentage points. It’s not much, but it does mean the troubled supermarket has been welcomed into the elite 10% plus shorted table for the first time, at 10.2%.

Super Retail also posted a disappointing result last week, but this time the extent of weakness was not fully anticipated. Super shares plunged 15%, allowing shorters to take some profits. Super shorts fell 1.9ppt to 7.3%.

Select Harvests reported last week and its shares continued their downward slide. In this case, the shorters elected to build on positions rather than take profits. Select Harvest shorts rose 2.0ppt to 7.0%.

Beach Energy reported last week and enjoyed a rally thereafter, although a stronger oil price provided incentive. The sharpness of the rallies in resource sector stocks we’ve seen this week smacks of short-covering. Last week Beach shorts fell from 6.4% to somewhere under 5%.

While other moves outlined below were all less than a percentage point, it is interesting to note among those stocks seeing short-covering last week were Fortescue Metals ((FMG)) and Oil Search ((OSH)), and mining/gas service contractors ALS ((ALQ)) and MMA Offshore ((MRM)).

MMA and sector peer Monadelphous ((MND)) used to be peas in a pod towards the top of the most shorted table. The mermaid has now swum, all the way down to 6.8%, while poor old Mona is still stuck up there in third position on 17.7%.

The Fortescue move is interesting given this week shares in the iron ore miner jumped a whopping 23% in one session, the day before an announced JV deal with Vale. Understandably, ASIC has issued Fortescue with a “please explain”.

The week before last, Vocus Communications ((VOC)) shorts dropped from 16.2% shorted to 4.8% shorted. I suggested in last week’s Report that we best await confirmation of the move given ASIC data are often questionable, but this week Vocus has snuck back into the table at 5.4%, confirming the move.

Weekly short positions as a percentage of market cap:

10%+

MYR   20.8
MTS    18.3
MND   17.7
FLT     13.9
PRY    13.8
ORI     13.6
WSA   13.2
WOR   13.1
GXL    12.0
CAB    11.9
AWE   10.9
AWC   10.3
WOW  10.2

In: WOW        Out: MIN

9.0-9.9%

JBH
 
Out: WOW, SEK, SUL, RFG

8.0-8.9%

SEK, MIN, TFC, RFG, GUD

In: MIN, SEK, RFG               Out: SGH, GEM, FMG, OSH, ALQ

7.0-7.9%

GEM, FMG, OSH, IVC, ALQ, SGH, SUL, CAR, BEN, SHV

In: SUL, GEM, FMG, OSH, ALQ, SGH, CAR, BEN, SHV                       Out: KAR, MRM

6.0-6.9%

MRM, AAC, KAR, PDN, CTD, WHC, NWS

In: MRM, KAR, CTD                        Out: CAR, BEN, BPT, SGM

5.0-5.9%

IFL, KCN, CDD, SGM, MGX, VOC, SYR, AHY, BKN, GMA, PPT, ILU, BOQ

In: SGM, VOC                       Out: SHV, CTD, SCP, SVW, ARI

Movers and Shakers

In last week’s Report I wrote:

“Yes, Mineral Resources ((MIN)) mines iron ore. No, Mineral Resources is not a junior pure-play iron ore miner. The company’s major source of earnings in the low iron ore price environment is its minerals processing service, which provides annuity-style revenues and ensures the company can boast a strong balance sheet even as the iron ore price has tumbled.

“It even means Mineral Resources is in the position to be an opportunistic acquirer at this troubled time. Do the shorters understand that? Or do they simply see a company in the same vein as an Atlas Iron or BC Iron or Grange Resources? Two weeks ago, Mineral Resources was the fourth most shorted stock in the market at 16.6%, having spent a very long time up in such high echelons. Last week the stock’s shorts fell by five full percentage points to 11.6% as the share price proceeded to double. That’s still leaves Mineral Resources among the elite, but for how long?”

Not very, it would seem. Mineral Resources shorts last week fell another 2.8ppt to 8.8% from 11.6%.

Super Retail has for some time now been a retailer wrenched by a dual personality. On the one hand are the company’s Super Cheap Auto and Rebel Sports brands, which each reporting season post consistently solid results, and on the other is the company’s leisure business, including serial disappointer Ray’s Outdoors. Ray was once again toasted on his own barbeques this season, to a worse extent than brokers had feared.

Not everybody loves Ray. What to do? While Super management tries to figure that one out, Super shares have plunged and the shorters have taken some profits. Super shorts fell 1.9ppt last week to 7.3% from 9.2%.

I noted a couple of weeks ago that almond producer Select Harvests ((SHV)) had snuck into the bottom of the 5% shorted table for the first time, having suffered through a boom and bust in almond prices. With “bust” still evident, Select’s profit result was met with further selling and the shorters continue to circle. Select’s shorts increased 2.0ppt last week to 7.0% from 5.0%.

Beach Energy ((BPT)) posted a solid result last week and enjoyed a rally, albeit with a little help from a stronger oil price. Short-covering was evident, as Beach has now fallen out of our 5% plus table from 6.4% the week before.

The reduction is nevertheless complicated by the fact Beach’s merger with Drillsearch is now complete, and there was likely some short/long arbitrage play going on ahead of the event.
 

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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