Investors Plugged into Consumer Electronics

The whizzing and whirring of new and innovative gadgets has silenced after the Consumer Electronics Show 2011 closed on Sunday in Las Vegas where 2,500 exhibitors showed off their wares. We look at investor sentiment towards some of the majors at the show including; Research in Motion (NASDAQ:RIMM), ARM Holdings (LON:ARM), Sony (NYSE:SNE), Verizon Communications (NYSE:VZ), AT&T (NYSE:T) and Apple Inc (NASDAQ:AAPL)

Research in Motion attempted to woo the audience with its new PlayBook tablet alongside approximately 80 other tablets on show. RIM has seen a spike in short interest as it has increased from 1% to 3.5% of total shares outstanding on loan since mid December. One way of gauging investor sentiment towards its future profitability is to observe how much is in the hands of large, long term investors and whether this is changing. We are able to view a proxy for such daily institutional ownership by looking at the holdings of funds who lend their shares which shows a significant increase from 35 million shares to 53 million since mid December. Other companies exhibiting tablets included Motorola and HP. Short interest in the former is clouded by the reverse stock split and there is little noteworthy short activity in HP.

3D TVs were a hot feature, especially with Sony showing off their TV which doesn’t require the glasses. Short interest is low in the main Tokyo listing of Sony at 0.2% of total shares outstanding and in the thinly traded the New York listed ADR with 0.6%, where the proportion of lendable supply currently out on loan is at a high of 23%.

Verizon staged elaborate presentations about their recently launched 4G networks and slew of smartphones and tablets but most prominent was the news that the iPhone is coming to Verizon much to the dismay of the current sole provider AT&T. Securities lending activity in Verizon shows an increase in short interest to 2.5%. However, a significant proportion of this activity may be dividend arbitrage ahead of the dividend today which may be clouding the underlying short interest activity in AT& T too. We currently see a low of 0.8% of total shares outstanding on loan for AT&T.

The press wrote extensively about whether Intel could break beyond its PC heritage to address the tablets dominated by ARM Holding, which is set to benefit further following Microsoft’s recent announcement that it will embrace ARM in its new operating system. All three show low short interest of 1% or less, yet shorts have covered in ARM reducing holdings from a peak of 10% observed in May 2010 to 1.2% of total shares outstanding on loan.

Finally, Apple surprisingly did not unveil anything exciting and new at the show. However, it definitely held a dominant presence as scores of exhibitors displayed iPad related products. Short interest in Apple is low as always, but it rose from 0.2% in early November to an annual high of 0.8% in mid December. Short covering in the stock has since reduced this figure to 0.5% of total shares outstanding on loan. Also, of interest on the long side is that Apple has seen the second largest net increase in global inventory over the first week of 2011 to break 200 million share mark.

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