Short Stories

Short sellers reduce positions in Air Berlin ahead of Q4 results

Air Berlin, the budget German airline, announces its Q4 results Monday. The report comes quick on the heels of the airlines' announcement of March 23rd of an uptick in its services between Southwest Florida and Dusseldorf in time for the busy summer travel season.

Although Air Berlin's shares are down 3.66% since December -- from €5 to €3 on Friday, short investors have decreased their positions significantly over the past year, from 17% of the company’s shares on loan in March 2008 to 2% now. This short covering could indicate the market is anticipating positive results from the Q4 report. This is according to Data Explorers (www.dataexplorers.com), the short selling data research firm based in New York and London. 

Similarly, Dana Petroleum which has preliminary results Monday, has also seen some of its short positions covered, from 10% of the company in January to 7.2% now. Crude oil futures fell on Friday. The attached chart shows the level of short interest (red line) in Air Berlin vs the share price (green line) for 12 months to March 2009.

 

Short covering in British Airways and Delta

British Airways (BAY), who release a Traffic Report Friday, have seen a wide amount of short covering, down from 4% of the company on loan in early February to 1.7% now. This is in line with a slight rebound in price, from 120p to 140p in the same time frame. Prior to this, the price dropped from 180p to 110p between December and late January, as investors increased positions from 3% to 4%.

 

In the US Small Caps, Delta Air Lines (DAL) have also seen some short covering, down from 4.8% of the company on loan to 3.5% between March 2 and 20, and back up to just under 4% now. The price has halved from $12 to $6 between late December and now.

Short interest increases in Novo Nordisk ahead of company discussion

Novo Nordisk (NOVO B), the Danish pharmaceutical company, has seen 500% increase in the amount of the company on loan since early March - from 2% then to 10% now. The company's share price has fallen from 310DKK to 270DKK between early February and last week, with the price rebounding slightly from 250DKK in the past few days. Utilisation, relatively, is not particularly high at 25%, which means that it is still fairly easy to borrow this stock. On March 19th there were 3.5m shares traded compared to the three-month average of 1.5m.

Short position still high in Liberty ahead of EGM

Liberty International hold their EGM on Wednesday, and the short position is still high, with 13.5% of the company on loan, up from 10% in early January. Short investors have held on to the trade for the last eight weeks despite the recent rebound in price, from 270p to 410p between late February and now, presumably because they feel that the price might have further to fall. Utilisation, or the percentage of the available supply out on loan to short investors, is also very high at 65%, slightly down from 67% earlier this week.

 

Short covering in Lafarge ahead of EGM

Lafarge hold their Extraordinary General Meeting on Tuesday, amid a significant amount of short covering of the company's stock; down from 15% of the company to 11% between February 23 and now. This closing out of short positions could mean the market is expecting Lafarge's share price, which has dropped from 50EUR to 30EUR and back up to 35EUR between December and now, to increase further. According to a local subsidiary of the company, Morocco's cement market is likely to grow slightly in 2009, as state-backed social housing projects in the country offset delays and cancellations in commercial real estate.

 

In the United States, Texas Industries, a similar company listed on the Russell 2000, has remained around the 16% - 18% mark since December, as short investors retain their positions in line with the fall in price, from $35 to $13 between December and early March. The price has also rebounded slightly in recent weeks, from $12 to $20.

Short interest builds up in L&G as it halves its dividend

Legal & General (LGEN) cut its dividend on Wednesday, the first time in its history, in an attempt to preserve capital as it reported heavy losses for 2008. The insurance group also halved its pay-ou to 2.05p a share. L&G was also forced last month to set money aside for potential defaults on its bond portfolio to £1.25bn.

As you can see from the red line on this graph, short investors have increased their positions in L&G over the past five weeks, from 0.3% of the company on loan on February 16th to 2.2%. As you can see from the green line of this graph, the share price has rebounded from 21p on March 9 to 42p now, but investors have still not closed out their positions, despite taking heavy mark to market losses. On March 2o there were 100m shares traded compared to the 12-week average of 37m.

 

This chart shows the volume of L&G's shares traded vs the Utilisation (red line), which is the percentage of the available supply on loan to short investors as opposed to the company's entire shares.

Supply increases in Commerzbank amidst price rise

Commerzbank (CBK), up 3% on Wednesday afternoon trading, has seen a recent decrease in the amount of available supply that has been lent out to short sellers, from 64% of the available supply to 56% between Friday of last and Monday of this week. This is in line with a price rise, from 2.89EUR to 2.96EUR during the same time frame.

Here is the chart that documents how much of the supply is out on loan (red line) vs the share price (green) over the last week. You can see the large drop in the available supply means there is now more available to borrow.

 

On March 16the amount of CBK's entire Market Cap that was out on loan rose from 9.72% to 9.83% on March 18. This figure has now dropped down from 9.83% of the compamy to 9.75%, again, as the market anticipates that the price will rebound.

 

It is the opposite story for Deutsche Boerse (DB1), the most borrowed stock on the DAX. This chart, which shows the amount DPW's shares on loan over the past three months, indicates a clear sentiment that the market believes this stock has further to fall, despite the recent rebound in price from 30EUR to 40EUR. Since December, the short position has increased by 400% - from 5% to 20%.  The percentage of the available supply is at 50%, a relatively low figure compared to the amount of the entire shares that are on loan at 20%.

Short interest rises in Merck as it faces J&J rights snag

On March 10 the FT reported that Johnson & Johnson (NYSE:JNJ), the US pharmaceuticals group, had a month to decide whether to try and claim back full rights over two pivotal medicines as a result of Merck's (NYSE:MRK) $41bn planned takeover of Schering-Plough (NYSE:SGP).

Short interest has increased significantly in Merck, from 0.6% of the company to 1.8% since early March, as you can see from this graph below. It looks, too, like investors came to the trade late; after the fall in price from $31 to $21 between early February and early March, and before the recent rebound from $21 to $26 now.

J&J have also seen a rise in short interest, from 0.7% of the company in late February to 1.2% now. Prior to this, there was an increase from 0.8% to 1.2% between early and late January 2009. Investors then held on to the trade as the price fell from $58 to $46, before covering positions and taking profits.

 

Schering-Plough has seen its short position reduce, from 1.4% to 0.9% of the company on loan, juxtaposed with a rise in share price: from $16 to $24 between March 5 and now.

Short investors increase positions in Tiffany ahead of 76% profit fall

Tiffany (NYSE:TIF), the world's second-largest luxury-jewelry retailer, said fourth-quarter profit fell 76% after holiday sales shrank in the U.S. recession, according to Bloomberg. Net income dropped to $31.1m, or 25 cents a share, from $127m, or 96 cents a year earlier, the New York-based company said on Monday. Excluding one-time items, profit beat analysts' estimates by six cents. 

Since November 2008, short investors have increased their positions in this stock significantly, with the amount of the company's shares on loan rising from 9% then to 14% now. In the last month there has been a small amount of short covering, from 15% to the 14% on loan now. This short covering could indicate the market was anticipating that the stock would be up 15% in Monday morning trading. 

 

Short interest increases in Assicurazioni Generali ahead of results

Europe's third biggest insurer Assicurazioni Generali (G) planned to report full-year resutls on Friday. According to Bloomberg, the company may say that profit fell to 923m euros ($1.25bn) from 2.92bn euros a year earlier. As you can see from this graph documenting the insurer's shares out on loan (red line), short investors have increased their positions in this stock since November, when the company had 4.5% of its shares on loan, to 6.4% now. This is in line with the share price halving from 20EUR to 10EUR during the same time frame.

In London, Legal & General (LGEN) have also seen a rise in the amount of their shares on loan, from 0.5% to 1.5% between mid-February and now, juxtaposed with a fall in share price from 80p to 30p.

 

Meanwhile in New York, the Chubb Corporation (CB) has seen a large amount of short covering; down from 1.5% of the company being on loan in November and December to just over 0.2% now, a very small short position. On Wednesday there were 3.5m shares traded compared to the half-year average of 2m. The company's shares have bounced in the last week from $35 up to $43.