There have been some very interesting moves by the short sellers over the past week.
Most notable are the big moves against Aristocrat Leisure and Asciano which have seen the level of shorts increase by 52% and 44% respectively. What’s really interesting about these moves is that Aristocrat has been very strong lately while Asciano has been in a fairly tight range.
That suggests sellers think both stocks could be in for a big move. A reversal in the case of Aristocrat and a break lower out of the range for Asciano.
On the other side of the ledger, it looks like the sellers have been taking advantage of the collapse in the NAB’s share price to exit some of their shorts which have fallen 15%. Similarly, the drop in Suncorp to $12 has seen a big reduction of 17% in the level of shorts in that stock.
Here are the top 10 stocks by percentage decrease and increase in short positions.
Stocks of the week
Adelaide Brighton Cement (ABC): Up 12.2% this year, Adelaide Brighton has had a strong run but its share price might have “have been getting somewhat ahead of itself”, says Angus Nicholson, market analyst at IG in Melbourne.
That may explain why short positions in the stock have been steadily increasing, he says. Equally, the explanation could be in the fact that “while Australian housing construction does not look like it is about to suddenly fall off a cliff, Australia’s housing approval growth has weakened dramatically since the second half of 2015,” Nicholson says.
H esays the average 12-month price target of A$5.10 shows “there’s still room to fall from its $5.37 level”.
“The risks certainly look to be towards the downside for the stock after it has lost 6.3% so far in June.”
Spark Infrastructure (SKI): Steady cashflows and utility dividend stream have helped SKI have a cracking year with its share price up 22.3% ytd, Nicholson says.
Nicholson believes that sentiment has improved for the stock – which is in a strong uptrend – after the “recent announcement that Cheung Kong Infrastructure was looking to sell its 6.7% stake in the company”.
That may sound an unusual reason to be bullish but that “has heightened interest for what price it may fetch given that it would be difficult to obtain such a stake in the company in the open market,” Nicholson says.
Sentiment has been further buoyed by the announcement last week that they would “sell off their 10.6% stake in rival DUET Group and use the A$305 million raised to pay down its debt”, he said.
That combination has seen many shorts exit SKI.
You can follow Angus on Twitter: @ANicholson_IG