5 short positions to monitor

Some short positions stay in place for a long time because of perceived structural problems, and they don't change that much from week-to-week without a significant fundamental catalyst. However, there are some trends worth discussing.

Each fortnight we will show changes in stock short positions and director share transactions. The idea is not to promote short selling or push trades that insiders are transacting, but to provide additional market information to help investors make informed investment decisions. 

5 short positions to monitor

The short position in AMP has been growing, despite a c.10% grossed-up dividend yield, given the short-side view of fall-out from the Royal Commission coming and significant structural headwinds. 

Short positions in Qube Holdings (QUB) have increased after the share price bounced off the A$2.17 low in April and the stock now trades on a FY18 PE ratio above 34x.

Short interest in Link Market Services (LNK) increased after the recent Federal Budget indicated the Australian government wants to consolidate inactive small accounts, with the Australia Taxation Office acting as administrator. 

On the flipside, there's a short squeeze going on in Domino's Pizza Enterprises (DMP). Macquarie, Goldman and Morgan Stanley are all targeting offshore audiences and pushing DMP's "long-term growth runway" in Europe and Japan. With less than a fortnight to go before every AFL, Union or League supporter you know becomes a soccer expert, pizza is back on the TV table. 

BWX blew some hedge fund performance expectations out the window this month, following the surprise proposal from the senior management team backed by Bain Private Equity to acquire the company at A$6.60/share. The price squeeze following the announcement allowed one of the largest shareholders, Capital Research Group, to exit more than half their position at A$6.10/share. 

The table below shows the short positions as a percentage of float-adjusted shares outstanding. The table also calculates "Days-to-trade", the number of days trading (on average) needed to cover the short position. It is a shorthand way of looking at the potential market impact in the event of a short squeeze being triggered.

Director buying /selling to monitor

The table below, collated by Market Index, shows recent director share transactions above a minimum value of A$50K. The ASX requires company directors to disclose all such share transactions within 5 business days under 'Appendix 3Y - Change of Director's Interest Notice.' 

Source: Market Index, Mason Stevens

A director share purchase we showed last time was in Specialty Fashion Group (SFH) post their restructuring announcement. Noni B had provided SFH with an all-cash $31m offer for a portfolio of challenged brands (Millers, Katies, Crossroads, Autograph and Rivers), a transaction that was well received by the market, with the shares jumping 58% that day. The disposal strengthened the company's balance sheet and, according to the announcement, creates an opportunity for SFH to pay dividends in the future. 

However, retailers remain one of the most shorted sectors (e.g. HVN, JBH) as the shift to online merchants in Australia is still significantly behind the US.   

Greencross (GXL) is the owner-operator of veterinary clinics and pet care retail stores. At the start of May it issued a profit warning that sent the share price down a rabbit hole and sparked a further round of broker downgrades. The 5-year low in the share price has attracted some director buying.