The Short Report

Array
(
    [0] => Array
        (
            [0] => ((MND))
            [1] => ((MTS))
            [2] => ((MYR))
            [3] => ((GXL))
            [4] => ((ORI))
            [5] => ((CQR))
        )

    [1] => Array
        (
            [0] => MND
            [1] => MTS
            [2] => MYR
            [3] => GXL
            [4] => ORI
            [5] => CQR
        )

)

This story features MONADELPHOUS GROUP LIMITED, and other companies.
For more info SHARE ANALYSIS: MND
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 10, 2016

Last week saw the ASX200 punch up through the 5000 mark for the umpteenth time and onward through 5100.

Poor old Monadelphous ((MND)). Through no fault of its own, the much admired but seriously commodity price-affected resource sector service provider last week found itself the most shorted stock on the ASX, with only the slightest tick-up to 17.9% shorted. Previously third, Mona’s ascension is due to a 0.7 percentage point drop in Metcash ((MTS)) shorts to 17.6% and a full 4.2ppt plunge in Myer shorts to 16.6%.

Myer and Metcash having been swapping the number one and two spots for many months up to now, often with daylight to third. Clearly some Myer shorters decided it prudent last week to square up ahead of today’s earnings result, the response to which sees Myer shares up 10% at the time of writing.

Smart move.

Even more spectacular was a 5.5ppt plunge in Greencross shorts last week. Greencross has been resident in the elite 10% plus shorted club for many weeks but received a conditional takeover bid in February. Someone appears to have now bottled, sending Greencross shorts down to 6.5% from 12.0%.

Orica is another 10% club stock to see at least some reduction in shorts last week on the back of commodity prices rebounds, while otherwise the sea of green below largely reflects downward bracket-creeping as the stock market rallied.

Oh, and for the first time in the history of this Report, there’s now a REIT in the 5% plus table.

Weekly short positions as a percentage of market cap:

10%+

MND   17.9
MTS    17.6
MYR   16.6
PRY    14.1
WOR   13.8
FLT     13.6
WSA   12.8
ORI     12.5
AWE   11.6
CAB    11.3

Out: GXL, AWC, WOW

9.0-9.9%

WOW, AWC, MIN
 
In: WOW, AWC, MIN           Out: JBH

8.0-8.9%

JBH, TFC, RFG, SEK

In: JBH                       Out: MIN, GUD

7.0-7.9%

GUD, OSH, FMG, IVC, GEM, ALQ

In: GUD                      Out: SGH, SUL, CAR, BEN, SHV

6.0-6.9%

SHV, MRM, SUL, GXL, SGH, PDN, WHC, BEN, CAR, KCN, CTD

In: GXL, SHV, SUL, SGH, BEN, CAR, KCN                    Out: AAC, KAR, NWS

5.0-5.9%

NWS, AAC, KAR, IFL, MGX, BOQ, CDD, ILU, PPT, SYR, SGM, CQR, BKN

In: NWS, AAC, KAR, CQR              Out: KCN, VOC, AHY, GMA

Movers and Shakers

As I write, shares in department store relic Myer ((MYR)) are up over 10% following the release of the company’s interim earnings report, implying the result was somewhat better, or should we say less bad, than the market was expecting. It was never going to take much of a
“beat” to send Myer shares flying given up to the week before last it was the most heavily shorted stock on the market at 20.8%.

It would appear some nervous shorts decided to square up last week ahead of today’s result release. Myer shorts fell a full 4.2 percentage points last week to 16.6%.

Veterinary clinic and pet supply retail chain Greencross ((GXL)) received a conditional takeover offer from a private sector consortium back in February, a day before releasing a first half result in line with broker expectations. Greencross’ share price closed at $6.52 the day before, the consortium offered a conditional $6.75 and the share price closed at $7.10. The share price has since been to almost $7.70 and last week was trading around $7.40-50.

The market is assuming Greencross is “in play” and presumably the Greencross board will be holding out for a sweetened deal, although there has been no new news on that front. But last week Greencross fell rather spectacularly out of the 10% plus shorted club where it has been for many weeks on a reduction to 6.5% from 12.0% shorted. Someone appears to have bottled.

The fortunes of explosives manufacturer Orica ((ORI)) are inexorably tied to the resource sector and thus to commodity prices. The recent rebound in commodity prices has proven a positive for Orica’s share price, and last week Orica shorts fell 1.1ppt to 12.5% from 13.6%.

A special mention this week goes to retail real estate investment trust Charter Hall Retail ((CQR)), which snuck into the 5% plus shorted table last week on 5.0%. This deserves special mention simply because there is no other REIT in the table, and given the popularity of the yields offered by REITs these past few years, none that I can ever recall in the life of this Report.

Charter Hall Retail’s only crime is to have proven too popular, beyond what analysts consider realistic pricing of a balance of yield versus growth potential. The FNArena broker database shows three Hold and three Sell ratings.
 

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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