The Short Report

Array
(
    [0] => Array
        (
            [0] => ((MND))
            [1] => ((MTS))
            [2] => ((PRY))
            [3] => ((MIN))
            [4] => ((MYR))
            [5] => ((JBH))
            [6] => ((MIN))
            [7] => ((FMG))
        )

    [1] => Array
        (
            [0] => MND
            [1] => MTS
            [2] => PRY
            [3] => MIN
            [4] => MYR
            [5] => JBH
            [6] => MIN
            [7] => FMG
        )

)

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 17, 2016

Last week saw the ASX200 push on towards 5200 but run into some resistance, notwithstanding a fair few stocks going ex-dividend. Analysts were questioning the sustainability of the commodity price rebound and their fears have begun to play out this week.

Last week saw Myer report a better than expected result which prompted a 10% share price jump on the day – not surprising given the extent of Myer shorts. There was indeed short-covering involved in the rally, as Myer shorts fell to 14.8% last week from a previous 16.6% and a top-of-the-table 20.8% the week before that.

Myer is now the fourth most shorted stock on the market behind oil price-impacted Monadelphous ((MND)), Aldi-exposed Metcash ((MTS)) and government regulation-exposed Primary Health Care ((PRY)). Government regulation is also a potentially negative theme for Cabcharge, along with uber-disruption, which last week saw its shorts increase to 12.6% from 11.3%.

It looked for a while like the shorters might have finally given up on shorting mineral processor Mineral Resources ((MIN)) but it jumped back into the 10% plus table last week. The short-covering rally in Fortescue Metals we saw two weeks ago, when someone seemed to know something about the Vale JV to be announced the following day, is now more evident in the numbers. Fortescue shorts have fallen to 6.3% from 7.6%.

Weekly short positions as a percentage of market cap:

10%+

MND   17.3
MTS    17.3
PRY    14.8
MYR   14.8
WOR   13.6
FLT     12.7
CAB    12.6
ORI     12.1
AWE   12.0
WSA   11.5
MIN    11.1

In: MIN

9.0-9.9%

JBH, AWC, WOW
 
In: JBH           Out: MIN

8.0-8.9%

No stocks

Out: JBH, TFC, RFG, SEK

7.0-7.9%

SEK, GUD, IVC, OSH, TFC, RFG, MRM

In: SEK, TFC, RFG, MRM                Out: FMG, GEM, ALQ

6.0-6.9%

SHV, GEM, ALQ, SUL, KCN, BEN, PDN, FMG, SGH, NWS, GXL

In: GEM, ALQ, FMG, NWS             Out: MRM, WHC, CAR, CTD

5.0-5.9%

CAR, CTD, AAC, SGM, IFL, WHC, CDD, KAR, BOQ, BDR, ORE, BKN, MGX, TEN, CQR

In: CAR, CTD            , WHC , BDR, ORE, TEN                  Out: NWS, ILU, PPT, SYR

Movers and Shakers

Traders who ultimately decided to square up their shorts ahead of department store relic Myer’s ((MYR)) result release last week – taking Myer shorts down to 16.6% from a previous 20.8% — did well. The 10% share price jump prompted by a better than expected result, or more realistically, a not as bad as expected result, clearly involved further short-covering.

Last week Myer shorts fell 1.8 percentage points to 14.8% from 16.6%.

For some time, state governments have been attempting to undermine the monopoly position and subsequent over the top processing fees of Cabcharge with tightened regulation. But while this process remains ongoing, the disruptors – Uber in particular – have come along to turn the traditional taxi market on its head. This week Cabcharge received ACCC approval to go ahead with its new “ihail” booking app, which the company hopes will put a halt to the disruptor onslaught.

It seems the enjoyment of a monopoly is pretty hard to shake for Cabcharge nonetheless, given ACCC approval was only granted once Cabcharge dropped its intention to make ihail processing the only way a passenger could pay. But is ihail too little too late anyway, now that Uber has raised the bar? Last week Cabcharge shorts rose 1.3ppt to 12.6% from 11.3%.

Sometimes short traders are like a dog with a bone. JB Hi-Fi is a good example ((JBH)), as the electronics retailer is a perennial member of the higher echelons of the most shorted table, yet one wonders if the shorters have ever made any money out of it.

For the past couple of weeks I’ve been following the short movements of Mineral Resources ((MIN)) – primarily a minerals processor but also a junior iron ore miner – as it slipped from the top of the table to as low as the 8% bracket a couple of weeks ago following a positive earnings result and doubling in share price. Now that the iron ore price has come off a bit, so has the MinRes share price, and the shorts have begun to rebuild. Last week MinRes returned to the 10% plus club with a 1.8ppt increase to 11.1% from 9.3%.

Fortescue Metals ((FMG)) never quite made it as far as the 10% plus club but did reach right up there as the iron ore price plummeted. The problem for the shorters, aside from the company’s announced JV with Vale, is that Fortescue’s cost-cutting efforts have been so substantial they have confounded even the more positive of stock analysts.

Last week Fortescue shorts fell 1.3ppt to 6.3% from 7.6%.

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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