Why short sellers are losing interest in these 4 stocks
Stocks like Perpetual, Chalice Mining and Flight Centre shorts have dropped over the last two weeks.
Source: Livewire Markets
Mentioned
KEY POINTS
- 10 ASX-listed companies with a notable drop in short interest over the past two weeks
- Most of these stocks have been experiencing an unwinding of short interest since mid-November
Welcome back to another Short Seller Series. This time, we take a look at ASX companies experiencing a notable month-on-month decline in short interest.
Short interest among the list below and more broadly speaking, started to drop off around mid November 20022.
Interestingly, Bloomberg recently noted that the US market is closest to neutral positioning since the second quarter of 2022 after cutting over US$300bn of bearish bets.
At the same time, JPMorgan said that hedge fund de-grossing may also be nearing an end and coincide with a near-term pullback.
Note: The data refers to short interest changes between 20 January to 6 February 2023.
Ticker | Company | Short % | Prior period | Chg |
|---|---|---|---|---|
Perpetual | 0.67% | 13.46% | -12.79% | |
Nickel Industries | 3.50% | 5.35% | -1.85% | |
Flight Centre Travel Group | 12.61% | 14.11% | -1.50% | |
Paladin Energy | 2.52% | 3.93% | -1.41% | |
Block Inc | 0.79% | 2.02% | -1.23% | |
Temple & Webster Group | 4.71% | 5.74% | -1.03% | |
Chalice Mining | 4.54% | 5.45% | -0.91% | |
Aussie Broadband | 5.56% | 6.41% | -0.85% | |
Breville Group | 6.16% | 7.01% | -0.85% | |
Xero | 0.98% | 1.72% | -0.74% |
Interesting observations
Tech shorts retreat: The S&P/ASX 200 Info Tech Index rallied as much as 12% between mid January and early February. The risk-on attitude has been fuelled by factors such as a growing disinflationary narrative, soft landing expectations underpinned by labour market strength and China's reopening. Still, its worth noting that the short data only goes as far as February 6. The Tech Index has been on a 6 day losing streak since that date.
Perpetual short interest disappears: Perpetual's short interest was sitting at 13.5% on Friday, 20 January. By Monday, short interest nosedived to 2.9%. This coincides with the company's acquisition of Pendal on Monday, 23 January, which is set to boost funds under management to $200 billion from $93.7 billion (based on December quarter 2022 figures).
Perpetual 12-month short interest chart (Source: Shortman)
Chalice shorts burn: The rise in Chalice shorts (from 4.7% in mid-Nov to 7.1% by 30 Dec) coincided with a near 50% run up in its share price. Since the start of the new year, we've seen short interest progressively unwind to a near five month low of 4.5%. At the same time, Chalice shares have had a relatively quiet start to the year, up around 1.6%.
Chalice 12-month short interest chart (Source: Shortman)
Paladin shorts hit 13-month low: Paladin Energy is another name experiencing an outflow in short interest. The stock is up around 17% year-to-date but like most uranium names, it's gone nowhere since September 2021. The narrative is pretty much the same for uranium spot prices, trading mostly sideways for the past two years.
With the increasing need for energy security and hype around nuclear as a low-carbon alternative, could 2023 be the breakout year for the uranium industry?
Paladin Energy 3-year short interest chart (Source: Shortman)
Flight Centre shorts ease but still #1: Flight Centre has remained as one of the three most shorted stocks since the start of Covid. Although the drop to 12.6% marks the lowest percentage of shorts since November 2021.
Flight Centres shares have rallied around 15% since the start of February. This coincided with a $180m capital raising and trading update, some highlights include:
$180m at $14.60 per share (7.8% discount)
Acquisition expected to be mid-teens percentage EPS accretive
Trading update guided to $250-280m in underlying EBITDA for FY23 compared to -$183m loss in FY22 and -337.8m in FY21
Corporate segment was "outpacing industry recovery with record 1H23 TTV and on track to deliver record FY23 TTV"
Leisure segment was experiencing a "strong recovery in TTV compared to 1H22 as normal travel patterns resume"
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Flight Centre 12-month price chart (Source: TradingView)
