Short Stories

FTSE 250 Housebuilders outperform the market

Taylor Wimpey (TW.) gained a phenomenal 73.01% yesterday, spending a day at the peak of the FTSE 250 after news that the company is proposing a debt-for-equity deal to its lenders. There were concerns earlier in the week that the housebuilder would be either liquidated or forced to hand its money to creditors, with the percentage of its shares outstanding on loan increasing from 6 to 8%, preceded by a large amount of short covering earlier in the year - from 18% in August. Figures had shown that mortgage approvals had dropped 52% year-on-year causing a negative effect on the sector, as did a bearish note from Credit Suisse giving warning of a fire sale of land.

However, juxtaposed with this jump in share price comes a significant amount of short covering as of c.o.business on Tuesday, with supply becoming more available; as Utilisation dropped from 42% to 37% in the space of a day. The percentage of TW's shares outstanding on loan also fell from 8.2% to 8.05% in the same timeframe. On November 25th there were an average of 70M shares traded compared to the six-month average of 30M. Below is the graph of TW's Utilisation (the percentage of supply out on loan) for the past month. However, Merrill Lynch analysts remained negative on the stock, cutting their price objective from 9p to 5p, retaining 'underperform,' so it will be interesting to see the stock lending activity in this company over the coming months.

 

Barratt (BDEV) and Bovis (BVS) both added 3.4% and 11.1% respectively to their share price. Barratt has seen a large amount of short covering - down from 12.5% in late October to 10.4% now. Utilisation is at 48%. Bovis has also seen short positions being reduced, down from 15% on October 27th, to 11.5% now. Utilisation is at 28%.

Nestlé up 2% but short interest remains high

Nestlé was up 1.8% in this morning's trading, amidst reports this morning that Melamine has been found in some of their infant milk formula, says the Washington Post. As you can see from this graph of the percentage of Nestlé's shares outstanding on loan (%SOOL), short interest increased significantly in mid-November; from 12% to 23%. Since then there has been short covering, down from 23% then to 17.53% now. Utilisation is at 5.26% so there is still a lot of supply left to borrow.

 

The stock with the second highest percentage of its stock out on loan in the EMEA Food, Beverage & Tobacco Sector is Pernod Ricard at 9.76%, up from 6% in August, and Groupe Danone at 8.57% SOOL, up from 6% in September. In the FTSE, Northern Foods, up 2.37% this morning, has 7.27 SOOL.

Google to cut 10,000 jobs: Short interest increases

Google (GOOG) has admitted it can no longer defy the laws of economic gravity and is cutting 10,000 jobs. The biggest single business idea in history, with turnover in excess of $21bn during 2008, has told the world's press it will cut its workforce by 10,000, about a third of the total number of staff. Quarter-on-quarter revenue growth, which hit 14% last year, was only 3% in the last three months to September 30th. In Britain this growth has all but stalled, with revenues falling from £406m in the first quarter to £392m in the second and rising only slightly to £409 in the third.

As you can see from this graph which shows the percentage of Google's shares outstanding on loan to short investors (%SOOL), short investors have started to increase their positions in the Internet giant, with the %SOOL rising from 0.8% in late October to 2% one week ago and then back down to 1.74% now, a three-year high. Utilisation, or the percentage of the supply out on loan, has risen to 10% from 4% in early November, above the previous three-year high figure of 7.5%.

 

Yahoo! (YHOO)'s %SOOL has also increased, up from 0.5% in early November to 1.65% now. Utilisation has also spiked in Yahoo!, up from 3% to 9% in the same timeframe.

BHP and Rio

BHP Billiton Ltd (BHP) has abandoned its year-long pursuit of Rio Tinto Group; giving the current economic climate as a reason for the derailing of the hostile offer.

Rio plunged as much as 40% in London trading, while Australia-based BHP shares jumped 21%, according to Bloomberg. 

As you can see from this graph of the percentage of BHP's shares outstanding on loan (%SOOL) over the past six months, short positions have decreased from 6% in May to 2.9% now. RIO's %SOOL has increased from 1.8% on October 21st to 2.6% now.

BHP

 

RIO (London listing)

 

There has been a large amount of volume traded in Rio, around 15m shares were traded on November 5th compared with the six-month average of 7M. In BHP's case, around 30M shares were traded at the end of last week compared to an average of 15M.

UK Retail - Short interest increases in M&S

As you can see from this graph of Marks and Spencer's (MKS) percentage of shares outstanding on loan (%SOOL), short investors have increased their positions in this stock over the past month; with the %SOOL rising from 4.5% on October 15th to 6.7% now. Utilisation has also increased to 26% up from 18% on October 10th; but this is not a particularly high percentage and there is still a wide amount of supply left.

 

The opposite is true of J Sainsbury (SBRY), which has seen its short interest decrease 100% in mid-October in the space of days - down from 7% SOOL to 3.5% by October 10th. This figure has now decreased further to 2.4% now, juxtaposed with a rise in share price - from 250p in mid-October to 288p today and up 4.25%.

 

Tesco (TSCO), which has never been the subect of short interest, has just 0.6% SOOL, although this has increased slightly from 0.37% in early November. The price today is 294p and it is up 3.01% in this morning's trading.

 

General Motors soars 27%

General Motors (GM) soared 27% on the NYSE yesterday amid hopes of a bailout package, bouncing back from falls of 39%, which had seen the automotive giant's shares plummet to 70-year depths.

Short interest in GM has halved since August, when the percentage of the company's shares outstanding on loan (%SOOL) fell from 32% then, to 18% in early October, and remaining within the 18 - 19% bracket since then. This is still a sizeable figure, but what is interesting is the dramatic increase in Utilisation, or the percentage of the supply out on loan to short investors. This figure has risen from 70% to 90% since early October, which probably means that custodian banks are pulling the stock out of their lending programmes and/or selling the stock, as demonstrated by this graph of GM's Lendable Quantity (red line) v its Quantity on loan (green). As you can see, the Lendable Quantity has dropped from 150m in August to 90m now.

Supply in Woolworths decreases as shares fall to lowest level

Shares in Woolworths (WLW) fell to their lowest level after it emerged that the troubled company was in talks with Hilco UK, the retail specialist, over the sale of its 800 stores for£1.

We can see from the data that supply in WLW is extremely low, with the percentage of the available supply to borrow (Utilisation) at 79%, up from 60% in early October. The percentage of WLW's shares oustanding on loan (%SOOL) is 10.3%, an increase from 9% in early October but a decrease from 13% in January. As Utilisation is at an all-time high and %SOOL is not, supply is diminishing in this stock. Below are graphs documenting WLW's Utilisation over the last three years (top, red line) and WLW's %SOOL for the same time frame (bottom, red line).

  

Yahoo!'s short interest rises amidst Yang's departure

Yahoo (YHOO)'s chief executive and founder Jerry Yang has announced his resignation yesterday, telling the company he will stay as long as a successor is found. Yang's departure has renewed interest in the possibility of a fresh bid from Microsoft, and not everyone sees this as good news. Short interest in the company has risen from a very low base; 0.5% to 1.35% of shares outstanding on loan in the last fortnight. Utilisation, or the percentage of available supply, has also risen from 3.3% to 6.1% in the same time frame. Please find below the graphs documenting Yahoo!'s percentage of shares outstanding on loan for the last three months.

BskyB shows positive results

British Sky Broadcasting (BSY) appear to be benefiting from the consumer staying at home to watch television, with the percentage of its shares oustanding on loan dropping from 4.7% in August to 2.3% in mid-October. This figure has now rebounded to 3.5% but this is still a noteable decrease nonetheless. The share price has rebounded from 330p in mid-October to 375p today, although it looks as though the stock closed at - 0.73% today. Utilisation, or the percentage of the available supply on loan, has more than halved since April; from 33% then to 14% now.

Big Lots falls 13% but short positions decrease

Discount retailer Big Lots (BIG) is the second most borrowed stock in the S&P500 today, with 29% of its shares outstanding on loan (%SOOL) and topped by Mylan (MYL) with 30% SOOL. BIG's shares fell almost 13% on Friday. On November 7th, the company reported a 0.2% decline in third-quarter comparable store sales, falling at its lowest level in eight months. The company also stated that it now expects EPS near or slightly below the lower end of its prior guidance range of $o.15 to $0.19. However, the three-year high in short interest came in November 2007, when the %SOOL peaked at almost 55%. Short positions were then closed out to increase again in April this year from 25% to 50%. Since then there has been more short covering, but 30% SOOL is still a significant figure. In much the same trend, Utilisation has decreased from 70% in early October to 43% now.

 

In the UK, Vedanta Resources (VED), up nearly 1% today, has decided to cut its capital expenditure plans by $1.5bn through various initiatives. Since early October, the %SOOL have increased, from 4.3% on October 18th to 6% in early November. Positions have now been covered, presumably on the back of these initiatives, to 5% SOOL. Interestingly, Utilisation has increased from 25% on October 18th to 43% now. Liberty International (LII) is the most borrowed stock in the FTSE 100, with 10.59% SOOL, a fall from 15% SOOL in June.

There has been a steady increase in short positions in Next (NXT) since July, when the %SOOL rose from 4% then to 10% now. This comes despite increased interest in the brand, potentially on the back of its catalogue purchase service. However, the company is down 2.34% today.