Short Stories

Data Explorers Short Portfolio: Up 30% in 8 Months

Data Explorers has been monitoring the performance of a portfolio of short stocks selected by our screening tools since 7th June 2007.  The performance of this paper portfolio shows that the average return (calculated on an equally weighted basis opening price to opening price between the date when the story was published and 28th January 2008) was 29.7% per stock compared with a (short) return of 10% in the FTSE All World during the same period.

Total based on alerts since 7th June 2007	30%
Total based on news since 29th October 2007	9%
Overall Total since 7th June 2007	19%
FTSE ALL WORLD since 7th June 2007	10%

Of the thirty-eight stocks in the portfolio, only four have subsequently risen in price since the publication date, namely Yamana Gold, Hagemeyer, Calmaine and Fast Retailing.  Outstanding successes on the short side were: American Home Mortgage (delisted), Erinaceous Group (down 95% since publication), Northern Rock (down 78% since we highlighted it in a report on EMEA banks), Ambac (down 69%), Black's Leisure (down 65%), Martha Stewart (down 59%) and IKB (down 55%).  Download short_portfolio.xls

While some people may find it macabre to examine stocks which have lost so much value, we believe it is important to highlight the fact that stock borrowers (hedge funds and prop traders)came early to many of the themes which have dominated the last eight months, namely subprime, property and retail.  We would also highlight the fact that the cost of borrowing many of the stocks in our portfolio is not taken into account, and nor is the bid-offer spread. Please refer to our disclaimer concerning investment advice.

After 29th October, we began to focus more on stocks which feature in the daily news.  These stocks produced a return of 9% on average between 29th October and 28th January, while the FTSE World index produced a return of 14% in the same period.

If you would like further information about the methodology used to screen for potential short stocks, please contact Alex Hofmann (+44) 207 392 4010 or Email: ah@dataexplorers.com

Has EADS been salvaged by Emirates?

Yesterday saw the first successful day for EADS (EAD), when Airbus clinched the biggest single order in commercial aircraft history. Who sold it? Dubai’s Emirates Airline.

The FT today reported how the Middle Eastern emirate had enough faith in EADS, who’s %MCOL today stands at 5.81%, down -6.5% from a week ago.

However, investors are still bearish towards the long-suffering European aircraft maker, as the Lendable as % Market Cap is just 5.79%.

In previous days the newspaper had documented the woes of EADS, who allowed US rival Boeing to overtake them.

Boeing’s Lendable as % Market cap is a healthy 23.8% with only 1.18% MCOL today.

EADS had planned a fresh wave of cost cutting and restructuring as its competitiveness was undermined by a week dollar. But despite a small increase in short interest in the past few days, EADS’ share price rose by 1euro and their %MCOL has dropped since November 1^st.  However, you will see from this graph that short interest in Boeing has increased in the past ten days, with the price dropping, so people were perhaps expecting a downturn – as they may expect an upturn from EADS after being salvaged by Emirates.

And, says the FT, “as welcome as this public expression of confidence from Dubai may be, the huge extra workload equally poses some critical issues.”

So what do you think?

Is Dubai an oasis or a mirage for Airbus/EADS?