Most shorted ahead of earnings
A review of how short sellers are positioning themselves ahead of earnings announcements in the coming week.
- Shorts cover positions in Alcoa as stock rallies ahead of earnings
- Despite a 28% rally in shares short sellers increase positions in Tesco
- Japanese real estate targeted as short interest in Properst rises along with shares
With 28% of its shares outstanding on loan Sm Energy is the most shorted stock in North America ahead of earnings. Short interest has surged by almost a fifth in the last month, despite a jump in share price and is back to highs last seen in January 2015. The oil & gas explorer and developer is focused on preserving balance sheet strength and improving its liquidity - its shares have fallen by two thirds over the past 12 months.
Westamerica Bancorp and Fastenal feature for a consecutive quarter among the most shorted firms ahead of earnings in North America.
Shares outstanding on loan in Westamerica breached 20% in February 2015 with its stock surging but some covering has been seen lately, with short interest now at 17.6%.
Fastenal citied tough trading conditions in the last quarter as the health of clients deteriorated in the second half of 2015. Despite this, shares have rallied almost 30% since January lows.
Shorts have covered 23% of positions in Fastenal since peaking in February with 15% of shares currently outstanding on loan.
Kicking off earnings season with the second largest aggregate short position in North America (behind Fastenal's $1.6bn value on loan) is metal producer Alcoa with over $750m in value on loan. After posting a fourth quarter loss but beating analyst earnings expectations, shares in Alcoa have bounced and shorts have covered. The company currently has just fewer than 10% of shares outstanding on loan with the stock still down some 30% over the past 12 months.
Most shorted in Europe is French food retailer Casino Guichard with 9% of shares outstanding on loan.
Casino joins Tesco with 6.5% of its shares sold short. European retailers continue to attract strong short interest as the industry battles against price deflation and aggressive competition from German discounters Aldi & Lidl. Tesco has staged an impressive rally year to date rising 28%. However, despite the rise short sellers have increased positions by 41% with only some marginal covering in recent weeks.
Second most shorted ahead of earnings in Europe is Manchester based Nanoco PLC with 8.7% of shares outstanding on loan.
Nanoco researches and develops quantum dot based products for use in display, lighting, solar and biomedical applications. Shares have slid 60% in the last 12 months.
Lastly the third most shorted stock ahead of earnings in Europe is incubator/venture firm Rocket Internet with 8% of shares outstanding on loan. Shares in Rocket have almost halved over the last 12 months, continuing to fall after the company's IPO in 2014.
Most shorted in Apac and seeing a significant rise in short interest year to date is Japanese real estate firm Properst with 11.8% of shares outstanding on loan. Shares in the company have risen dramatically year to date, up by 70%.
Among the most shorted in Apac last quarter is the largest newspaper publisher in Singapore, Singapore Press which has seen shorts cover their positions, shares outstanding declining to 8.5% as shares jumped higher in 2016.
Japanese food chain Yoshinoya is the third most shorted with 8.5% of shares outstanding on loan. Shares have come under pressure in 2016, declining 15% with short interest increasing by almost two fold.
Relte Stephen Schutte | Analyst, Markit
Tel: +44 207 064 6447
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