The Short Perspective: Forthcoming European Earnings

We look at investor sentiment towards a number of European companies updating the markets with interim and preliminary earnings this week including: Thomas Cook Group (LON:TCG), Tui Travel (LON:TT ), Thyssenkrupp AG (ETR:TKA), Halma Plc (LON:HLMA) and Bouygues SA (EPA:EN).

Thomas Cook will report interim 2010/11 results on Wednesday. As the travel group delves into the Russian travel market, investors on the long and short sides of the market seem to have a split opinion on the future performance. Short interest has risen from 1% in mid-July to an annual high just short of 5%. However, we see a different perspective on the long side of the market. Institutional funds who lend have substantially increased their holding from 260 million to 320 million shares over this period.

Other travel companies reporting year-end results this week are Holidaybreak Plc and Tui Travel Plc. Short interest in Holidaybreak is insignificant whilst it is difficult to determine short interest in Tui Travel as it is clouded with convertible bond arbitrage. It currently sees 8% of total shares outstanding on loan.

Germany’s biggest steel maker, Thyssenkrupp AG will publish its fiscal year 2009/10 results on Tuesday. Although the company’s shares reached an annual high last week, short interest has been gradually increasing from 1.5% to 2.7% since September. Increased negative sentiment can be seen from Institutional funds who lend, which have reduced their stake from 87 million to 77 million shares since August.

Halma Plc is a conglomerate which is grouped under three divisions - Infrastructure Sensors, Health and Analysis and Industrial Safety. It has enjoyed a second year of exponential growth and a rallying share price. Short sellers have been consistently covering their positions over the year, with short interest having halved to 4.5% of total shares outstanding. It will announce interim 2010 earnings on Tuesday and the shares have enjoyed positive sentiment with funds who lend increasing their stake from 73 million to 90 million shares over the year.

French TMT company with a construction division, Bouygues SA will report third-quarter earnings on Thursday. Although there has been significant historical short interest in this stock, short interest has picked up from 5.5% to 7.5% since mid-August. It is interesting to note that the proportion of lendable supply out on loan in Bouygues averages at 20%, which is considerably higher than the sector average of 12.8%.

For users of the Bloomberg terminal, we have attached a brief User Guide which illustrates how to conduct analysis on one of the stocks featured above. Click here to read.