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

Short-age of Uranium?

Hedge Funds have seized upon recent relative weakness in Uranium prices to short various resource comapanies with exposure to this widely occuring mineral.

Short interest has spiked this month in UUU (5.2%), UEX (3.4% mcol) and XE (20% mcol)

Of these three, there is some very recent short covering in XE and UUU as funds anticipate that the share price fall has reached its floor.

In the case of XE, hedge funds are perhaps mindful that we are overdue their first drilling result from Namibia, according to people monitoring the situation.

Governments, including the UK, have recently published white papers on their Nuclear Power ambitions and look set to follow France's lead in replacing conventionally powered power stations with Nuclear.  In the medium term Uranium looks to have strong demand.

The days to cover (short interest ratio) is 10 days for UUU, 19 days for XE and 8 for UEX.

Golden Star sees it shares on loan double.

Golden Star Resources Ltd announces pricing of $125 million convertible senior unsecured debentures.  Golden Star is an international gold mining and exploration company producing gold in Ghana, West Africa.  Utilisation (percentage of available stock on loan) is currently 61%, up from 30% a week ago.  This is a sharp rise in total on loan as the borrowers increase their short positions.  The current MCap on loan is 10%, and the share price is 3.50 CAD.