The Short Report – 25 Feb 2021

This story features WEBJET LIMITED, and other companies. For more info SHARE ANALYSIS: WEB

See Guide further below (for readers with full access).

Summary:

Week ending February 18, 2021.

Last week the ASX200 entered a period of madness that has pervaded through this week and continues today. Sharp daily ups and downs, often contradictory, with a net result of little overall index movement.

Also experiencing sharp ups and downs in recent weeks have been the travel agent stocks. A snap lockdown one minute – sell – a vaccine rollout the next – buy. The most volatile of the three has been Webjet ((WEB)), up until last week the most shorted stock on the market.

Tassal Group ((TGR)) has now hit the top of the table, but only by a third decimal place. Tassal shorts are up slightly from the week before but so are Webjet shorts. This week has nevertheless seen another burst of vaccine optimism.

We note Flight Centre ((FLT)) shorts also ticked up last week.

Being the most shorted stock, Webjet was also briefly the subject of some blind fools trying to do a GameStop. It should be noted, as has been raised as an issue at the Congressional inquiry into GameStop/Reddit/Robinhood, that for some reason the US allows stocks to be shorted by greater than 100% of shares on issue.

Given the stock has to be borrowed I’m at a loss as to how this works, other than via some sort of synthetic. GameStop was shorted 140% before the squeeze began. Webjet shorts have never exceeded 20%.

You do the math.

After an unusually quiet week in Short Land the week before, last week saw a little more shuffling about of positions but only two moves worthy of note.

I have been saying all along that the big short position in Northern Star Resoruces ((NST)) was a play on the merger with Saracen Minerals. That merger completed last week and whaddya know? Northern Star has disappeared completely off the table from 10.3% shorted the week before.

The only other movement of note is that of Resolute Mining ((RSG)). See below.

Weekly short positions as a percentage of market cap:

10%+
TGR    12.7
WEB   12.7

Out: NST

9.0-9.9

No stocks, no changes
           
8.0-8.9%

MSB, ING, RSG, AVH

In: RSG, AVH                        Out: WSA

7.0-7.9%

SSM, MTS, WSA, FLT

In: WSA, FLT             Out: AVH, MYR

6.0-6.9%

FNP, MYR, A2M, EOS

In: MYR, EOS            Out: RSG, FLT, IVC             

5.0-5.9%

IVC, ALK, BVS, TYR, BGL, CUV, BOQ, EML

In: IVC, BGL             Out: EOS, NEA

Movers & Shakers

Irrespective of gold price movements, Resolute Mining’s share price has been in a long slow slide since August last year.

Industrial disruption and equipment unavailability at its flagship Syama mine led Resolute to production guidance downgrades and the miner still missed its downgraded production guidance in the December quarter. It did nevertheless manage to control costs.

As the company is trying to pay down debt in 2021, an improved performance at Syama is critical. Resolute has another promising-looking resource but that’s a way off.

The shorters are circling, lifting Resolute shorts to 8.3% last week from 6.8%.

We might also note Bellevue Gold ((BGL)) made its debut at the bottom of the table last week.

ASX20 Short Positions (%)

Code	Last Week	Week Before	Code	Last Week	Week Before
ALL	0.2	0.2	MQG	0.5	0.5
ANZ	1.1	1.1	NAB	1.2	1.3
APT	1.2	1.2	NCM	0.1	0.1
BHP	3.6	3.5	RIO	0.3	0.2
BXB	0.3	0.3	TCL	0.8	0.7
CBA	0.6	0.7	TLS	0.4	0.3
COL	0.4	0.5	WBC	1.0	1.0
CSL	0.1	0.1	WES	0.5	0.5
FMG	0.3	0.3	WOW	0.2	0.2
GMG	0.2	0.2	WPL	1.0	1.0

To see the full Short Report, please go to this link

Guide:

The Short Report draws upon data provided by the Australian Securities & Investment Commission (ASIC) to highlight significant weekly moves in short positions registered on stocks listed on the Australian Securities Exchange (ASX). Short positions in exchange-traded funds (ETF) and non-ordinary shares are not included. Short positions below 5% are not included in the table below but may be noted in the accompanying text if deemed significant.

Please take note of the Important Information provided at the end of this report. Percentage amounts in this report refer to percentage of ordinary shares on issue.

Stock codes highlighted in green have seen their short positions reduce in the week by an amount sufficient to move them into a lower percentage bracket. Stocks highlighted in red have seen their short positions increase in the week by an amount sufficient to move them into a higher percentage bracket. Moves in excess of one percentage point or more are discussed in the Movers & Shakers report below.

IMPORTANT INFORMATION ABOUT THIS REPORT

The above information is sourced from daily reports published by the Australian Investment & Securities Commission (ASIC) and is provided by FNArena unqualified as a service to subscribers. FNArena would like to make it very clear that immediate assumptions cannot be drawn from the numbers alone.

It is wrong to assume that short percentages published by ASIC simply imply negative market positions held by fund managers or others looking to profit from a fall in respective share prices. While all or part of certain short percentages may indeed imply such, there are also a myriad of other reasons why a short position might be held which does not render that position “naked” given offsetting positions held elsewhere. Whatever balance of percentages truly is a “short” position would suggest there are negative views on a stock held by some in the market and also would suggest that were the news flow on that stock to turn suddenly positive, “short covering” may spark a short, sharp rally in that share price. However short positions held as an offset against another position may prove merely benign.

Often large short positions can be attributable to a listed hybrid security on the same stock where traders look to “strip out” the option value of the hybrid with offsetting listed option and stock positions. Short positions may form part of a short stock portfolio offsetting a long share price index (SPI) futures portfolio – a popular trade which seeks to exploit windows of opportunity when the SPI price trades at an overextended discount to fair value. Short positions may be held as a hedge by a broking house providing dividend reinvestment plan (DRP) underwriting services or other similar services. Short positions will occasionally need to be adopted by market makers in listed equity exchange traded fund products (EFT). All of the above are just some of the reasons why a short position may be held in a stock but can be considered benign in share price direction terms due to offsets.

Market makers in stock and stock index options will also hedge their portfolios using short positions where necessary. These delta hedges often form the other side of a client's long stock-long put option protection trade, or perhaps long stock-short call option (“buy-write”) position. In a clear example of how published short percentages can be misleading, an options market maker may hold a short position below the implied delta hedge level and that actually implies a “long” position in that stock.

Another popular trading strategy is that of “pairs trading” in which one stock is held short against a long position in another stock. Such positions look to exploit perceived imbalances in the valuations of two stocks and imply a “net neutral” market position.

Aside from all the above reasons as to why it would be a potential misconception to draw simply conclusions on short percentages, there are even wider issues to consider. ASIC itself will admit that short position data is not an exact science given the onus on market participants to declare to their broker when positions truly are “short”. Without any suggestion of deceit, there are always participants who are ignorant of the regulations. Discrepancies can also arise when short positions are held by a large investment banking operation offering multiple stock market services as well as proprietary trading activities. Such activity can introduce the possibility of either non-counting or double-counting when custodians are involved and beneficial ownership issues become unclear.

Finally, a simple fact is that the Australian Securities Exchange also keeps its own register of short positions. The figures provided by ASIC and by the ASX at any point do not necessarily correlate.

FNArena has offered this qualified explanation of the vagaries of short stock positions as a warning to subscribers not to jump to any conclusions or to make investment decisions based solely on these unqualified numbers. FNArena strongly suggests investors seek advice from their stock broker or financial adviser before acting upon any of the information provided herein.

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