The Short Report

Summary:

Week ending July 16, 2020.

Last week saw the ASX200 bounce around but go nowhere until some positive vaccine news sparked a rally at week’s end.

Once again very little action at the top of the table, and really only a bit of shuffling around at the low end.

Only one stock saw its short-position change by one percentage point or more last week, being Zip Co ((Z1P)), the shorts in which rose to 7.1% from 5.3%. See below.

Otherwise, about the only stock worth mentioning is Clinuvel Pharmaceuticals ((CUV)), which is a biotech specialising in skin disorders. It has been quietly creeping up the table, reaching 8.0% last week.

While it’s difficult to make a connection between skin disorders and covid, the stock has been extremely volatile these past months, appearing almost daily on the top five ASX200 winners or losers boards. While biotechs are by their nature risky investments, it still seems remarkable.

Clinuvel is not covered by any FNArena database brokers.

Weekly short positions as a percentage of market cap:

10%+
MYR   12.1
WEB   10.0

No changes

9.0-9.9

ING

No changes

8.0-8.9%

NEA, CUV

In: CUV          Out: BOQ, GXY

7.0-7.9%

BOQ, GXY, FXL, ORE, Z1P

In: BOQ, GXY, FXL, Z1P                Out: CUV

6.0-6.9%

MTS, FNP, JBH, PGH, PPT, SGM, SUL, MSB

Out: FXL, SXL, FLT, PLS

5.0-5.9%

FLT, PLS, SEK, CLH, ALG, IVC, SXL, BIN, LYC, BUB, IFL, AMA

In: FLT, PLS, SXL                 Out: Z1P, CTD, LOV

Movers & Shakers

From its covid-crash bottom to Monday last week, Zip Co rallied 550%. The BNPL player has largely chased up more recognised peer Afterpay ((APY)), which rose 760%. In a covid world, short-term finance for millennials is king.

Zip Co did provide a positive June quarter update at the end of last week, and two of the three FNArena database brokers covering the stock remain on Zip for the ride (Buy), while UBS has bottled on valuation and downgraded to Sell. Targets range from $6.45 (Ord Minnett) to $5.70 (UBS).

The comparison with Afterpay is interesting. Six FNArena brokers cover the latter stock, with two on Buy, three on Hold and one on Sell, which is of course UBS. Morgan Stanley has a target of $101 for Afterpay (last trade $71.97), while UBS has $27.00. UBS believes millennials with access to buy-now credit are going to blow themselves out of the water.

So far they haven’t, but the shorters are circling, with Zip Co now on 7.1% from 5.3%.

By contrast, Afterpay did feature heavily on the 5%-plus shorted table earlier in the run, which preceded that of Zip Co, but it’s now only 1.0% shorted, leaving a few smouldering corpses. Which way will Zip Co go?

ASX20 Short Positions (%)

CODE LAST WEEK WEEK BEFORE CODE LAST WEEK WEEK BEFORE
ALL 4.2 4.4 NCM 0.6 0.8
ANZ 0.7 0.7 RIO 2.1 2.1
BHP 4.1 4.1 SCG 0.8 0.8
BXB 0.3 0.2 SUN 0.6 0.5
CBA 0.5 0.5 TCL 0.6 0.6
CSL 0.3 0.2 TLS 0.5 0.4
GMG 0.4 0.4 WBC 0.9 0.8
IAG 0.7 0.7 WES 0.4 0.5
MQG 0.3 0.2 WOW 0.2 0.3
NAB 0.8 0.8 WPL 1.3 1.3

To see the full Short Report, please go to this link

Greg Peel

About Greg Peel

Greg Peel joined Macquarie Bank in 1986 and acquired trading experience in equities, currency, fixed income and commodities derivatives, ultimately being appointed director of equity derivatives trading. He later published In With The Smart Money (a plain English guide to the mysterious world of financial markets and derivatives) and acted as a consultant to boutique investment funds. In 2004 Greg joined FNArena as a contributing writer. He is now a director and principal of the company. Greg compliments the journalistic background of the FNArena team with lengthy experience as a financial markets proprietary trader.

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