The Short Report – 16 Jun 2022

Weekly Reports | Jun 16 2022

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

Summary:

By Greg Peel

Week Ending June 9, 2022.

Last week the ASX200 snuck above 7200 once more before beginning a tumble that culminated in this Tuesday’s Wall Street-led wipe-out.

As the table below suggests there was a bit of shuffling of the deckchairs, but no change in short position exceeded one percentage point.

A couple of juxtapositions were evident.

Flight Centre ((FLT)) shorts slipped slightly to 16.9% atop the table but Webjet ((WEB)) dropped to 8.5% from 9.3%.

Block ((SQ2)) continued its steady rise up the table, to 9.4% from 8.7%, while Zip Co ((ZIP)) shorts slipped slightly, to 7.9% from 8.0%. Both were subsequently carted on Tuesday, leading down the technology sector.

These ever-volatile no-profit-yet BNPL growth stocks copped it from all sides. Rising rates had already drawn concern from Australian regulators, regarding consumer default risk, who now want to step up their scrutiny. The shock US CPI print sent rates surging ever higher. Block’s close link to bitcoin, which fell -15% last Friday night, didn’t help.

Also moving steadily (back) up the table is chook farmer Inghams Group ((ING)).

Meat prices on Australian shelves have been rising for years due to export demand but chicken is reasonably immune given there is negligible international trade, as every country has chooks. This should make chicken the go-to protein for lower income earners (and those who frequent Kentucky and Scottish restaurants) in this time of food inflation.

The problem is soaring grain prices -- and we do export a lot of grain – exacerbated by the war. Rising input costs are putting a strain on Inghams’ margins, hence the company will be forced to raise prices.

It will be interesting to see next week just what impact Tuesday’s wipe-out had on short positions. A great opportunity to take profits, unless you’re in for the kill.

Weekly short positions as a percentage of market cap:

10%+
FLT     16.9
BET     14.0
NAN   12.0
PNV    11.2


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