The Short Report – 25 Jan 2023

Weekly Reports | Jan 25 2023

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


By Greg Peel

Week Ending January 18, 2023.

FNArena’s Short Report returns for 2023 after a one month hiatus. Typically the Report is published on the Thursday, but given the holiday tomorrow we’ve brought it forward, before returning to its regular Thursday slot next week.

After dipping to 6912 post-Christmas, the ASX200 has from there put on an 8.5% rally to today, where as I write the index is trying to hold above 7500. As one might expect, a full month has brought about some notable moves in short positions, and the rally a net drop-out of five stocks from the 5%-plus shorted table.

We’ll start with New Zealand homewares and sport retailer Briscoe Group ((BGP)), which suddenly appeared before Christmas from oblivion at 10.8% shorted, but has now disappeared again. No idea why.

Similarly mysterious is Inghams Group ((ING)), which was last at 11.3% shorted and has also dropped off the table. The stock price has had its ups and downs but is little changed since Christmas, and there has been no news from the company. UBS noted this week chicken is the best value currently among the meats.

Lithium has been on a tear lately, which has either led to short-side scepticism or choosing between miners for long-short plays. Core Lithium ((CXO)) has moved up to 9.1% shorted from 6.7%, and Liontown Resources ((LTR)) has appeared at 6.1% from below 5%.

Nanosonics ((NAN)) spent 2022 all over the shop, and 2023 to date has been little different, although the stock is net higher. Nanosonics shorts have fallen to 6.1% from 8.2%. The company released a better-than-expected market update last week but, as reported by FNArena yesterday, broker scepticism remains high for the year ahead.

Technology has in general been back in favour, reflecting a rebound in the Nasdaq this month on falling US inflation and hopes for an upcoming Fed pause (as well as a -30% plunge on 2022). BNPL stocks have not been left out, and Zip Co ((ZIP)) shorts have dropped to 6.4% from 8.7%.

The sector generally is experiencing somewhat of a renaissance in 2023 as the likes of Sezzle ((SZL)) and Zip Co ((ZIP)) release market updates with more positives than negatives.

On a more general observation, shorts in consumer stocks have fallen over the period. Alongside Inghams we’ve seen other food-related short positions reduced, including Domino’s Pizza ((DMP)), Costa Group ((CGC)), Select Harvests ((SHV)) and Metcash ((MTS)), as well as discretionary JB Hi-Fi ((JBH)).

By most reports consumer stocks had a pretty solid Christmas/New Year period. Whether 2023 will be the same is another matter.

Weekly short positions as a percentage of market cap:

FLT     14.2
BET     12.9
PPT     12.6
MP1    10.2

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