Short Stories

Sony's short interest doubles in six weeks

Sony (6758) today unveiled a sweeping shake-up of its businesses and radical management changes aimed at better intergrating its hardware and software operations and giving Sir Howard Stringer, CEO, more control of the group's struggling electronics business (Source: FT.com). The changes reflect heightened alarm at the inability of Sony to turn round its electronics business despite four years under the leadership of Sir Howard, according to the FT.

In the last six weeks, short interest has doubled in the electronics giant; from 1.5% of the company on loan to 3% now - noticeable for an Asian stock, especially as 22% of the available supply has been lent out. The group's share price has fallen from 2,300JPY to 1,550 since early January.

 

Elsewhere in the sector, with Panasonic (6752), it is the opposite story; short interest nearly halving, from 0.7% to 0.4% since November 25th. 3.5% of the available supply has been lent out. Panasonic's share price has remained around the 1,000-1,200JPY over the last six weeks, spiking up from 1,000-1,300 just before Christmas, presumably for that very reason.

  

On November 25th, over 6% (the high was in July - 8%) of Sanyo was on loan; this figure has now dropped to 2.5%, juxtaposed with a fall in share price from 170JPY to 135JPY in the last two months, as short investors close positions and take profits. In November, 80% of the available supply had been lent out, making it extremely difficult to borrow.

Short interest increases in EDF and Enel as they embark in Italian venture

France's EDF energy (EEN) and Italy's Enel (ENEL), listed on the SBF80 and MIB30 respectively, have been on the radar of short investors as of late, as they set out to build four nuclear plants in Italy - the first since a national referendum halted the country's nuclear industry in 1987 in the wake of Chernobyl.

Only 1.17% of EDF is on loan at the moment, however there has been a significant increase from 0.95% in January, juxtaposed with a fall in share price from 32EUR to 27.5EUR since February 9th. Since February 16th, the 25% of EDF's available supply that is being borrowed has now reached 32%, although this is still not a particularly high figure. EDF was down 0.5% on Tuesday.

 5.5%  of Enel is on loan, up from 4.4% on January 26th. Less of Enel's available supply is on loan (25%) than EDF's but it does have a higher percentage of its entire Market Cap borrowed, which means that there is more supply available for lending in this company. Enel was also down 0.5% on Thursday).

 

Constellation Energy Group (CEG), a similar company on the NYSE, has also seen an increase in how much of its shares have been borrowed; from 0.6% of the company ten days ago to just under 2% now, albeit this being a small percentage nonetheless. Just under 8% of CEG's available supply is available for borrowing. In the last week there has been certain days when there has been a large increase in the volume of shares traded; February 18th with 1.4M, February 20th with 1.3M and February 24th with 1.2M, compared to the one month average of 0.6M.

 

Short sellers reduce their stakes in Nasdaq OMX ahead of full-year results

Nasdaq OMX (NDAQ), the stock exchange group, announces its full-year results on Thursday, and investors will be waiting in anticipation to see how the company is coping in the current environment. The company’s shares have fallen sharply in the last 12 months to half the level they were in early 2008.

Since February last year, short investors have almost doubled their positions in this stock from 4% of the company to 7.5% now, with a peak of 10% last summer.  This may indicate that the market is anticipating Nasdaq will deliver good news. 

 

This chart shows the level of short interest (red line) vs the share price (green).   

 

NDAQ

 

 

NYSE Euronext (NYX) has also seen a sharp decline in short interest – from 11% of the company to 5% now. The company’s share price has fallen from $45 in September to approximately $17 now.

 

NYX

 

 

In Europe, Deutsche Boerse (DB1) has seen a significant rise in short selling; up from 6% of the company in January to just under 16% now. The company’s share price has fallen from approximately 65EUR in September to 35EUR now.

 

DB1

 

 

 

Thomson Reuters announced its full-year results today, posting a stronger-than-expected quarterly profit, raised its dividend and said it expected revenue to grow in 2009, despite job cuts and reduced spending among its financial customers.

Given this is a subscription-based business, the trend in net sales offers a good indicator of how things are looking. Net sales were positive in the third quarter, but volatile, and it is possible that this number has moved into negative territory. Investors will also be looking for an announcement on cost savings. Numis is forecasting revenues of $13.3bn and earnings of $2.7bn.

Thomson Reuters is dual listed, so to start with, here is the chart of the company’s Canadian listing, which shows, despite the recent uptick in the percentage shows a general amount of short covering. It is the same story for the UK-listed stock, although short interest has increased since the listing one year ago, from 2% to 9% and back down to just under 8% now. This increase was potentially because investors thought that the UK-listed security was over-priced, which as it transpires has not moved a significant amount.

Elsewhere in the media sector, The New York Times has also seen a significant amount of short covering (down from 18% to 10% since September), despite the drop in share price, from $14 to $4. Trinity Mirror has also seen investors step away from the trade, down from 20% SOOL to 4% now, despite, with a recent slight increase in share price since November; from 25p to 40p.

Thomson Reuters - Toronto

 

Thomson Reuters - London

Anglo American announces, Alcoa sees a rise in short interest

Anglo American (AAL), the mining and natural resource company presents its results tomorrow, and its CEO Cynthia Carroll may face some tough questions, so says the FT. Falling platinum, diamond and copper prices have taken their toll on Anglo's profit margins, and analysts will be looking for signs of progress from Ms Carroll's cost-cutting drive (FT).

As you can see from this graph of Anglo's shares outstanding on loan (%SOOL), there has been a recent increase in the short position of the stock; up from 1% to 2.2% over the last ten weeks. However, this is still a small percentage, compared to, for example, Xstrata (XTA), which has just under 10% of its SOOL. XTA and Anglo's other rival Rio Tinto (RIO, London listing) have recently turned a rights issue and a cash injection from China respectively to shore up their balance sheets, whereas Anglo has manageable debt levels. RIO currently has 1.5% SOOL, up frmo 0.7% in January  and down from 2.7% in December.

Anglo American:

 

Xstrata:

 

Rio Tinto (UK)

 

The S&P 500 listed stock Alcoa Inc (AA), which produces aluminium, partly through the mining industry, has seen a rise in its %SOOL, up from 2% in October to 6% now and down from 8% ten days ago. This is in line with a fall in share price; down from $30 to $7 over the last six months, and in particular a severe fall in price, from $30 to $10 between September and October. Since that time short investors have continued to take profits as the price ebbs around the $10 mark.

General short covering in Dominos pizza as the consumer stays in

Despite the recent uptick in the percentage of the shares outstanding on loan (%SOOL) in the Russell 2000 listed Dominos Pizza (DPZ), from 2.5% to 3.62% since January 2009, short positions in this stock have been covered over the last year, with the %SOOL decreasing from 10% in July 2008 to today's figure. The share price has also rebounded; from $3 on November 24th to $7 now. The stock was in July 65% Utilised, but this figure has now more than halved to 30%, potentially because investors presume that people will be buying takeaways rather than eating out.

 

In the FTSE 250 listing (DOM), there has been an uptick in the short position over the past six months, from 1% to 3.5% SOOL, but more recently, since November, this figure has come down from close to 5%. Utilisation has also decreased from 30% to 24%. Britain's biggest pizza delivery chain reported strong sales growth and full-year profits yesterday (Tuesday), prompting brokers to upgrade 2009 earnings forecasts.

Short covering in Intercontinental Hotels Group ahead of results today

InterContinental Hotels Group PLC (IHG) met expectations with its full-year results today (Tuesday), but said a sharp deterioration in fourth-quarter trading had accelerated in January, and it sees no improvement in sight.

The operator of Holiday Inn and Crowne Plaza hotels has seen a large amount of short covering, down from 9% of its shares outstanding on loan (%SOOL) to just under 5% now. IHG's share price has fallen from 800p in September to 500p now. Previous to these figures, the %SOOL rose from 5% SOOL in late May to 10% during July and August, with investors coming to the trade as the share price began to drop, from the 800p figure mentioned, down to 600p within the space of a month (June 4th to July 2nd, as the %SOOL increased).

This graph traces IHG's %SOOL over the past year.

 

It is the opposite story for the S&P500 listed Starwood Hotels & Resorts Worldwide (HOT), where the %SOOL have risen from 2% to 10% over the last year, and in particular, up from 6% in November. This is combined with a fall in share price; down from $50 to $12 over the last 12 months.

 

The hospitality company Wyndham Worldwide Corp (WYN), also listed on the S&P500, have seen, like IHG, some short covering; down from 6% SOOL in September to 2% now, but previously up from 4% in February 2008. The company's share price has also fallen, from $25 to $5 since April last year. 

  

Ameristar Casinos (ASCA), an operator of casino facilities in local and regional markets and who are down 7% on Tuesday's morning trading (listed on the Russell 2000), have also seen a significant amount of short covering; down from 10% in August 2008 to 5% now, but previously up from 1% in February 2007, to 8% May of last year. Like these other stocks, the company's share price has decreased, from $35 in November 2007 to $10 now. Between April and September of last year, 80% of ASCA's stock that was available for borrowing was out on loan to short investors.

Wal-Mart's short position ahead of earnings tomorrow

Wal-Mart Stores Inc (WMT), the world's largest retailer, reports earnings for the fourth quarter on Tuesday, before the market opens (Source: Forbes). The company has been one of the few bright spots in retailing as it benefits from financially squeezed shoppers looking for cheaper options focusing on necessities during the recession, so say Forbes. Wal-Mart has outperformed competitors such as Target Corp (TGT) and Costco Wholesale Corp (COST), apparently because it has found the right mix of merchandise and marketing to enhance its renewed focus on price.

As you can see from this chart documenting the percentage of WMT's shares outstanding on loan %SOOL), short interest has been extremely low in Wal-Mart, down, even, from 1.1% in early December to 0.68% today. Utilisation is also low at 5%. WMT's share price has fallen from $63 to $47 over the past six months.

 

Target Corp has a higher %SOOL at 4%, down from 6% two weeks ago, which was a one-year high for the company. The share price has also fallen from $55 to $30 over the last six months. Utilisation is at 15%, down from a much higher percentage of 40% in mid to late January.

 

Costco currently has 3% SOOL, down from 5% six months ago. The company's share price has also fallen from $60 to $45 over the same timeframe. Utilisation has come down from 19% in early December to 10% now. On February 4th there were 8M shares traded, compared to the six month average of 3M, and this was in line with an increase in the borrow; from 2.3% to 3%.

 

Finally Macy's (M), has seen a much higher amount of short interest, up from 4% to 10%, with a notable increase that is visible in this chart between November 18th and December 9th. Investors came to this trade relatively late, increasing the borrow after the dramatic fall in share price; from $20 to $10 between September and November.

Short covering in Thyssenkrupp

Thyssenkrupp Ag (TKA) who have an earnings announcement today (Friday), have seen a large amount of short ahead of Friday's news, with the percentage of shares outstanding on loan decreasing from 25% to 8.3% since January 28th. Bloomberg reported that the group posted a smaller-than-expected drop in earnings and investors speculated a White House plan to help struggling mortgage borrowers will help to revive the economy.  Utilisation has also decreased from 69% to 18% in the same time frame. This is in line with a rise in share price; up from 15EUR on February 3rd to 18EUR now.

 

LaFarge Sa (LG) is the most borrowed stock in the EMEA Materials sector, with 12.65% SOOL, up from 7% three months ago. Utilisation is high at 60%, up from 33% in the same time frame. The Lendable Quantity in this stock has dropped dramatically from 19.5M shares in late December to around 17M now. The company's share price has dropped from 50EUR in January to 40EUR now but up from 35 three weeks ago.

 

In the American Small Cap market, Eagle Materials (EXP) has seen a recent uptick in short interest, up from 9% on January 26th to 10.5% now. This is combined with a recent rise in share price; up from $18 to $22, but an even more recent drop; down from $22 to $21. It will be interesting to see if short sellers retain their positions in this stock over the next week.

 

Like Thyssenkrupp, Texas Industries (TXI) has also seen a large drop in the %SOOL, down from 18.3% to 16.5% in the last week. Utilisation has also dropped, from 76% to 68% in the same time frame.  On February 10th there were 0.4M shares traded compared to the one-month average of 0.2M. 

 

North American Software Companies

Mcafee Inc (MFE) have an earning announcement today (Thursday), and as you can see from this graph of the percentage of their shares outstanding on loan (%SOOL), there has been some short covering, with investors closing their positions since early to mid-January; down from 7% SOOL then to 5% now. However, the position is not as low as three months ago when the %SOOL was at just over 1%. Investors have waited for the price to fall and have, in general, taken profits over the past month. Utilisation is low in comparison at 15%. Interestingly, on December 22nd, there were 10M shares traded in comparison to the 12-week average of 1M.

 

Elsewhere in the sector, Bankrate Inc (RATE), the internet-based consumer banking and personal finance network, have a considerably higher proportion of their %SOOL, 38%, up from 32% 12 weeks ago. Utilisation is extremely high at just under 90%, which means this stock is virtually impossible to locate right now. On February 6th there were 0.8M shares traded compared to the three-month average of 0.2M.

 

Other equivalent companies include Yahoo! (YHOO) and Mastercard (MA). Yahoo! currently has 2.5% SOOL, up quite significantly from 0.7% in November but down from 3% in late December. There has been a recent increase from 1.7% two weeks ago. Utilisation is at 13% which means there is still a lot more stock left to borrow.

 

Mastercard has high short interest, with 15% SOOL, but as you can see from this chart, down from the spike of two weeks ago when this figure rose from 14% to 21% in four days. Utilisation is at 60%. Around the time of this spike on February 5th there were 1.9M shares traded compared to the three month average of 0.7M.