Short Stories

Short interest in Australian stocks

According to our data, short sellers have dramatically increased their positions in Babcock & Brown (BNB) in the last month. The % Market Cap on Loan (%MCOL) of the investment adivsory company rose from 6% on January 1st to 12% earlier this week. It has now decreased slightly down to 10.6% today. The company's share price started to go down significantly at the beginning of this month, from 26AUD to 15AUD earlier this week, but it has risen slightly to 18AUD today.

Utilisation rose up to 80% between January 1st and earlier this week, and it has now dipped down to 60%, although this figure is still reasonably high. For those wishing to return shares, there are 6.43 Days to Cover. The rest of the ASX50 has  a Utilisation of 21% on average, and the Australia Diversified Financials sector has an average Utilisation percentage of 55%, which is closer to BNB's.

In the ASX Small Caps, the borrow has risen significantly in SEEK (SEK). The advertising company's %MCOL has risen from 5.5% on January 16th to 9.5% today. It has so far shown no signs of ebbing off. Utilisation rose from 50% on January 16th to 72% latest. SEEK's share price has dropped from 8.75AUD on January 16th down to 6AUD earlier this week, and back up to 6AUD today.

The volume of the shares traded was also well above the average around January 16th at 3.7M compared to the average of 1.5M. There are 14.18 Days to Cover.

The average Utilisation for the ASX Small Cap is 27%, and the sector, the Australia Commercial Services and Supplies' Utilisation stands at 17%, so SEK's is significantly higher than both.

Short interest in Sat Nav's

The borrow in Inmarsat (ISAT), who produce mobile satellite communications services, has decreased in the past two weeks, despite a significant increase since last October when the % Market Cap on Loan rose up from 4% then to 9% on January 11th, and then down to 7.5% today. The company's share price fell from 525p on January 8th to 450p on January 22nd, but it has since risen to 475p and the short has been closed out.

For those who increased their positions in Inmarsat in early January, a profitable trade would have been made. It is interesting that savvy short investors predicted the rise in Inmarsat's price and closed out their positions, too.

For another satellite maker, TomTom (TOM2), the borrow has in fact increased, from 2% on January 14th to 5.25% today. The company's share price has also fallen; from 52EUR in early January to 35EUR today. TomTom's Utilisation has also risen from 20% on January 12th to 45% today.

Short interest heats up in thermoplastics

Our alerts indicate a sharp rise in the borrow of Spartech Corp (SEH), a thermoplastics company based in Clayton, USA. In the past three weeks the company's % Market Cap on Loan (%MCOL) has risen from 6% to 11% latest. On January 15th Spartech's Director Lloyd E. Campbell announced he had bought 7,294  shares of common stock, potentially because he felt that the shares were undervalued.

However, Utilisation remains fairly low at 17% of the available stock on loan today, but up from 8% earlier this month. This suggests that there is still plenty of stock left to borrow, but whether investors will seize this opportunity is another matter. The company's share price fell from $23 in late July 2007 to $13 on January 10th, although since then it has risen slightly to $14.50 and back down to $14 today. Utilisation for the rest of the North America Materials sector stands at an average of 12%, whereas for the rest of the US Equity RUSSELL 2000 it is 35%, considerably higher than Spartech's (please see the graph of Utilisation for Spartech v the Market). For those wishing to return their shares in Spartech, there are 17.67 Days to Cover.

Other stocks in this sector with a high borrow include chlorovinyls and aromatics producer Georgia Gulf Corp (GGC), with a %MCOL of 30% (over in London at the height of Northern Rock's malaise, the borrow only reached 25%), and Utilisation at 65% with 29.13 Days to Cover, as well as Norbond (NBD), who have a %MCOL of 27%.

Norbord, who produce wood-based panels, also have a high Utilisation at 66%. The company's share price has dropped from 8.5 CAD to 6 CAD since early December, as you will see from this graph. Norbord has 55.62 Days to Cover.

Short interest in insurance

According to today's FT, Fitch Ratings has downgraded Ambac, who we blogged on earlier this month, from triple-A to double-A, as well as its smaller rival Security Capital Assurance (SCA) from triple-A to A, "sending shares in bond insurers sharply lower."

It also said that: "private equity companies, including TPG, value investors such as Wilbur Ross and asset management firms, are all considering launching bond insurers in a move that could hamper efforts to aid troubled incumbents such as Ambac and MBIA."

Today, Ambac has a %Market Cap On Loan (%MCOL) of 27.35%, with a Utilisation percentage of 44.61%. MBIA's %MCOL stands at 25.54%, with Utilisation at 39.85%.

The borrow in SCA increased significantly in early October, when the %MCOL rose from 7.5% to nearly 25% in the space of three weeks. Since then it has ebbed around the 15% mark. Interestingly the borrow in SCA has now reduced; down from 13% earlier this week to 6.15% today (please see graph). The share price has dropped from $35 in May to $5 today, although there has been a slight rise in share price which could explain why short sellers have decreased their positions.

Utilisation has also decreased. The percentage of what is available to borrow that was on loan once reached 70% (in late October), but it has now dropped down to 22%, although this is an increase from 20% at the start of this week. For those wishing to return shares, there are 11.85 Days to Cover. The rest of the North America Insurance Sector's Utilisation stands at 8%, but the rest of the US Equity (Other) Market stands at 20%, just below SCA's.

The borrow has also risen in PMA Capital Corp (PMACA), who are in the same sector as SCA and who have a debt service. The %MCOL has risen from 3% in January 2007 to 9% today. The share price has also dropped, from $11 in June to $8 today. It is still relatively easy to borrow the stock, with Utilisation at 27%.

Short interest in Organo

According to our data, short sellers have started to increase their positions in the Japanese listed Organo Corp (6368). The water treatment business now has a % Market Cap on Loan of 6.61%, up from 5.5% earlier this week. In July last year the borrow was 2%, and it then rose to 6% in late August, and has remained close to that figure since. The company's share price has fallen from 3,000JPY in late July to 750JPY latest (please see graph).

The Company also produces industrial chemical products such as activated carbon and charcoal, water treatment compounds, and ion exchange resins. The share price may have been affected by the general concern about being "green." However, another similar company, Maezawa (7925) has a lower %Market Cap on Loan of 1.5%, although its share price continues to fall from 1,600JPY in late August to 1,200 latest. However, similar to many Asia Pacific stocks, the Utilisation is still fairly high for Maezawa at 40%, so primarily there was never a large quantity of stock available.

The Utilisation has risen significantly in the past week for Organo, up from 45% on Monday to 80% today, so supply could be running out fast. There are 3.02 Days to Cover for those investors wishing to return shares.

The borrow in the FTSE 250

A report in today's FT.com says that "London equities failed to hold opening gains this morning after minutes from the Bank of England’s latest rate setting meeting showed a bigger than expected vote for a hold."

From the securities lending market's point of view, the borrow has risen in some of the FTSE midcaps as their share price falls.

Helphire (HHR), a company whose borrow has been reasonably high in the FTSE midcaps over the past six months, is now in second place to HMV as the most borrowed stock in the FTSE 250. (HMV has a %Market Cap on Loan %MCOL of 38% today).

Helphire today has a %MCOL of 21.88%, up from 15% when it paid a dividend on October 29th (please see graph).

Helphire said it was unaware of its slump in share price, down from 425p on October 29th, to 290p today. Interestingly, this is when the borrow really started to increase. There was an inverse correlation between the fall in share price and the increase in the borrow in early November.

Utilisation is also significantly high at 85% today. A year ago the per cent of the available stock on loan was 10%, a figure that has increased steadily over the past 12 months. The average Utilisation percentage for the rest of the FTSE 250 is 20%, and for the rest of the EMEA Transportation Sector it is 18%.

For those wishing to return shares in Helphire, there are 38.12 Days to Cover.

The borrow in Bradford & Bingley (BB.) is also reasonably high at 20.26%, as well as Johnston Press (JPR) at 20.06% and Signet (SIG) at 19.53%.

The borrow in Bradford & Bingley really started to rise in early September, from 7.5% %MCOL to 15% in the space of a fortnight. Since then it has risen from 15% and ebbed around the 20% mark. Goldman Sachs cut B & B from "sell" to "neutral" on December 6th, and B & B's share price has dropped from 380p in early September to 250p today. Utilisation has also risen sharply and now stands at 78%. There are 22.56 Days to Cover.

Since late October, the borrow in Johnston Press has also risen significantly, up from 13% then to today's figure of 20.06%. The group's share price has dropped from 375p in early September to 230p today. Utilisation is at 60%, and there are 18 Days to Cover.

Signet Group's Utilisation is lower at 50%, with 13.93 Days to Cover. Signet's share price has dropped from 95p on October 29th to 60p today. It is interesting that as the borrow in these stocks gets lower, so does the supply get higher.

A stock less heavily borrowed in the FTSE 250 is WH Smith (SMWH), who has a %MCOL of 4.7% and a Utilisation percentage of 21.1%.

Pubs and clubs attract short sellers

According to Reuters, Analysts feared on Friday that Britain's biggest nightclub, Luminar (LMR), will face a tough 2008, despite a solid Christmas and New Year.

Our data reveals that the most borrowed stocks in the Travel and Leisure sector today include Luminar, as well as Mitchells & Butlers  (MAB), Whitbread (WTB), JD Wetherspoon (JDW), Punch Taverns (PUB), Ladbrokes (LAD), Rank Group (RNK), and Enterprise Inns (ETI).

This is interesting, because there are fears at present that pub and club goers will opt to stay at home to cut back on spending in the face of higher bills and living costs (the notorious "January detox" may also have something to do with it, too). From the results we can see that gambling groups have also been the target of short sellers (Ladbrokes and Rank).

Luminar, which runs Oceana, Liquid and Lava club chains, has a % Market Cap on Loan (%MCOL) today of 8.85%, up slightly since Christmas Eve. This is a fairly large amount, but in general the borrow has gone down from 25% when the company listed last October. Luminar's share price has dropped from 625p to 300p between October 29th and now.

Wetherspoons' %MCOL has risen significantly since early January; up from 4% then to 9% now. The share price in the group has dropped from 750p on April 7th to 300p today, so for those who increased their positions a very profitable trade has been made (please see graph).

The borrow in Mitchells & Butlers (MAB) has risen from 10% to 15% between early January and now. Utilisation has gone up from 12% to 23% in the same timeframe, although with just under a quarter of the available supply on loan there is plenty left to borrow. The share price has dropped from 900p on July 7th to 400p today. Punch Taverns (PUB) has a %MCOL of 8.72%, up slightly from 7% on January 8th. Punch Taverns share price has dropped from 1,400p in mid-April to 400p latest.

Ladbrokes and Rank Group have a %MCOL of 8.67% and 10.87% respectively.

Interesting US stocks

According to our data, short sellers have increased their positions in the following US stocks:

Capital One Financial Corp (COF), Federal Realty Investment Trust (FRT), Salesforce.com (CRM), and priceline.com (PCLN).

The borrow in COF started to increase on November 5th, when the % Market Cap on Loan (%MCOL) rose from 5%, to 12% today. However if you look closely at this graph (you can click on it to increase it) you will see that the borrow has ebbed off slightly, presumably because investors are covering their shorts in order to make a profit. The share price has dropped from $65 in late October to 42$ today. Utilisation has not been higher than 30% in the last six months, so although the %MCOL has increased, there remains plenty more left to borrow. For those wishing to return stock, there are 16.71 Days to Cover.

FRT has an extremely high %MCOL, which has risen up from 14% on January 4th to 29% today, so almost a 100% increase in under a fortnight. The borrow has remained over 5% since August 13th, and the share price has dropped from $85 in late December, to $66 today. Like COF, there is still plenty left to borrow, with Utilisation at 37% today. There are 24.30 Days to Cover.

The borrow in CRM has risen from 7% in early January to 9% today. CRM's share price rose successfully from $47 in early November to $65 in late December, but it has now decreased from there, to $55 today, so savvy short investors could be set to make profits. There are 14.15 Days to Cover. Utilisation again is relatively low at 29%.

The highest %MCOL is PCLN, which is at 39% today, up from 34% on January 10th. This has corresponded with a fall in share price; from $116 in late December to $100 today. Utilisation stands at 74%, so unlike the above stocks, supply is much lower. For those wishing to return shares there are 18.67 Days to Cover.

UK Homebuilding stocks

According to our data, some of the most borrowed stocks in the EMEA Consumer Durables and Apparel sector are UK Homebuilding companies.

(From the most shorted down): Bovis Homes (BVS), Redrow (RDW), Persimmon (PSN), Taylor Wimpey (TW.) and Barratt Developments (BDEV) all have a % Market Cap on Loan over 7%.

According to the FT, who reported today that London equities had tumbled after sharp losses on Wall Street:  "Shares in Taylor Wimpey have suffered, despite reporting on Tuesday that it anticipated no big house price falls in Britain, and that full-year results would be in line with estimates. Bovis Homes also lost 5 per cent to 546½p, Persimmon shed 4.2 per cent to 686p and Barratt Development slid 2.8 per cent to 333½p. Rightmove, the online estate agent, fell more than 8 per cent to 367p."

The borrow in Rightmove (RMV) has gone up significantly, with the % Market Cap on Loan (%MCOL) 5.5% in early November, to 11% latest. Utilisation now stands at 80%, up from 55% in early November, so it is now difficult to borrow the stock. Earlier this week there were 2m shares traded, double the average for the last six months.

The borrow in Bovis Homes started to rise in early November, when the %MCOL went from 5% then to 15% latest, along with a fall in share price. The company told the FT on January 12th that it faced uncertainty at the start of 2008, along with Bellway (BWY), whose %MCOL has also risen from 4.5% to 5.5% since early December. There are 9.16 Days to Cover in Bovis.

As you can see from our graph of Redrow, the short was timed extremely well. Investors started to increase their short positions in late September, when the share price started to fall - from 500p to 400p in the space of a fortnight. Redrow's %MCOL rose from 5.8% then to 6.3% in early November, when there was an inverse correlation between the borrow and the share price. Those who had invested would have made a profitable trade.  It is interesting that Utilisation remained relatively low at around 40%, so there was still plenty of stock to borrow. In the last week both the %MCOL and the Utilisation have risen; Utilisation from 37% to 45% and the %MCOL from 10% to 13%, even though the share price has risen slightly from 260p to 280p. For those wishing to return shares there are 8.61 Days to Cover.

Persimmon's %MCOL has risen from 6.2% on December 3rd to 13% today, but Utilisation stands at 40%, so there is still stock available to borrow. Like Redrow, there was an inverse correlation in mid-December. There are 7.8 Days to Cover. Taylor Wimpey's %MCOL rose from 2.5% in mid-November to 7.9% latest. The share price started to fall in mid-September, from 350p, to 200p in mid-November. Utilisation stands at 20%, up from 10% in early December. There are 5.67 Days to Cover.

The borrow in Barratt homes has risen from 2% to 7% since early December.

Who has their eye on Carluccio's?

There has been unusually high recent trading volume in Carluccio's (CARL). This precedes a spike in the company's % Market Cap on Loan (%MCOL). The spike in trading occured in both early November, at 2.7m shares traded compared to the average of 0.5m, and again in the last fortnight, at 1.3m. The rise in the borrow happened after the second spike in volume, when the %MCOL rose from 0.2% in mid-December to 3.6% today.

The share price has fallen steadily since July 2007, when it stood at £2.15 then to £1.47 today. There has been an inverse correlation between the borrow and the share price in the last week, so for those who shorted the stock, a profitable trade was made.

Utilisation also stands reasonably high at 60%, having spiked up like the borrow; from 3% to 64% in the past week, so supply is running out fast. For those wishing to return shares, there are 8.02 Days to Cover. The rest of the EMEA Consumer Services sector's average Utilisation percentage, stands at 17%.

No institutions own any shares in Fishworks. Until recently, the stock was virtually all on loan, but since then a small number of institutions who owned the shares have since sold them.

The Restaurant Group (RTN), which has rebounded by 10% this afternoon, saw its %MCOL rise in December, from 2% to 3.5%.  However there is plenty of stock available to borrow, with institutional investors holding 33% of the shares, against the FTSE 250 average of 20%.