Short-sellers have Flight Centre in their sights

Photo: Scott Barbour/ Getty Images.

Short-sellers on the Australian Stock Exchange still have MYOB in their sights with outstanding short positions in the stock continuing to swing wildly.

After shorts, as measured by short interest ratio (SRI), which estimates how many days it would take to cover the amount of short contracts in the stock based on recent average daily volumes of trade, fell to 22 days last week, they have more than doubled their shorts back to an SRI of 49, according to data provided by analyst Angus Nicholson at IG.

That, Nicholson said, also means that around 23% of the float of MYOB is held by the shorts.

But the big mover on the week is Flight Centre which has come out of nowhere to post an SRI of 44 with 23.8% of the float in the hands of the shorts.

What’s really interesting about that is that while Flight Centre is off its lows, it is lagging the overall market performance badly.

Source: Reuters Eikon

Nicholson said that: “Investors continue to be pretty negative on the stock in the lead up to their FY16 earnings release on 25 August.”

We asked Scott Phillips, an advisor at Motley Fool, why that was the case. He told Business Insider that:

“Flight Centre continues to be perhaps the main focus of traders and investors who are looking to capitalise on the death of physical retail. Add to that some less-than-stellar recent results – and some concerns about slowing consumer spending – and you have the making of a short thesis.”

But he’s not convinced the shorts are on the right track adding “the same story was true of those predicting the death of Flight Centre in 2009 when shares fell 90%”.

“The shorters would have made money, of course, but reports of the death of Flight Centre is greatly exaggerated.”

Phillips is far less positive on the other big short position, MYOB, though. He said MYOB’s “cloud offerings are lagging those of Xero, and the shares are pretty pricey for a company that’s not winning in that important space…traders and investors are betting that the future might look a little less rosy than the past and that the current share price suggests”.

“It’s far from a certain bet that the longs will win this one,” he added.

Other stocks attracting the sellers interest include “a number of commodities related stocks”, Nicholson said. These include WorleyParsons, Monadelphous, and Western Areas. Nicholson said that even though they “been rallying of late it appears investor sentiment is still very negative given the size of the short positions”.

Here are the rest of the top 10 shorts by days to cover and per cent of float:

Source: ASX, IG

And here is the list of this week’s big movers:

Source: ASX, IG

Increases in shorts has been fairly muted elsewhere but Nicholson said short positions “have been climbing in Mantra Group again, and investors clearly still think there is value to be had by shorting the stock when it is above the A$3.00 level”.

While on the other side of the ledger there was a big decline in Corporate Travel Management (CTD) and Spotless Group.

“CTD continues to rally in the lead up to earnings, and a lot of shorts have been capitulating as fears grow that they could see a pop on an earnings surprise,” Nicholson said.

You can follow Angus on Twitter

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