Jewellery retailer Signet (SIG), owner of H.Samuel, Ernest Jones and Leslie Davis, has been the focus of short-sellers for the last six months, particularly since October. The percentage of market cap on loan (%MCOL) rose from 9% on October 7th to 12% today. Signet’s %MCOL (12%) is more than double the UK retail sector average (4.85%).
Traders started borrowing Signet at the end of June 2007 and it has proved to be a very profitable trade.
At the other end of the spectrum, Tiffany (NYSE:TIF) has also seen a rise in short interest, with the percentage of market cap on loan rising from 2% on October 22 to 5% today. Utilisation stands at 10%, up from 5% in late October. Institutional asset managers have been buying TIF throughout the year and they have been increasing their exposure even during the price weakness of the last month. Days to cover stands at five days because volume in the cash equity is so high.
Summary of borrowing in other companies with exposure to the luxury goods sector
Richemont (CFR) has seen a rise in borrowing since mid-September, but the percentage of market cap on loan is much lower than Tiffany at 1.4%.
Borrowing in Hermes (RMS) is off its summer highs at 5.54% of the market cap, while traders have been covering shorts in Bulgari ever since May. 5.12% of its market cap is currently on loan.
Tod’s (TOD) Utilisation has doubled since May, from 25% to 50%, while the market cap on loan has risen from 8% on November 1st to 11.26% today.
Bang & Olufsen (BO B) has been a highly successful short trade for patient investors. The borrow in B&O first started rising back in April 2006, rising from 6% to 14% by the end of 2006. B&O’s share price was fairly resilient until May 2007, since when it has fallen from DK 750 to DK 485 today. Long-only funds have been buying on weakness during November, causing the utilisation to fall from 86% in mid-November to 80% today. The percentage of market cap on loan remains stubbornly high at 14.38%.
Charts available on request.