Five European stocks reaching annual highs in short interest
By looking at five European companies hitting short interest at annual highs we see some fairly topical investment themes. This sample shows that demand to borrow is set to be a topic of heated discussion at today’s Securities Financing Forum (check out updates throughout the day). It continues to bubble up, especially given the increase in the number of firms looking “exposed” on valuation grounds. From the Capital Goods sector we feature Meyer Burger Technology (SWF:MBTN), from Household & Personal Products – Oriflame Cosmetics (STO:ORI), from Technology Hardware & Equipment - Premier Farnell (LON:PFL), from Software & Services – Autonomy (LSE:AU), and finally, the Media company: WPP (LON:WPP).
Our eye was drawn to the number of Capital Goods companies showing a momentous demand to borrow. Many of these are in Asia: Lonking Holdings(3339) and Toyo Tanso (5310). In Europe, it is Swiss listed Meyer Burger showing high and rising demand at 17% of total shares on loan, making this one of the biggest directional views by short sellers in Europe at this time. Meyer “offers machines, competence and technologies for the solar, semiconductor, optical and ceramic industry.” The watchword here is, clearly, “solar” given the short selling appetite to dine at this particular table. At least one sell side firm believes Meyer’s incredibly successful 2010 cannot be repeated, leaving its shares vulnerable. The data shows that their argument has fostered significant action. (NB: solar related stocks rallying as nuclear stocks fall).
Direct sales of cosmetics under the Oriflame brand are in the short sellers’ cross hairs with 10% of this USD 3bn company being borrowed. However, the last time the negative sentiment was this large the shares proceeded to double!
Premier Farnell is a familiar name when it comes to significant borrowing demand, but not for some time. Unlike the company mentioned above, short sellers show greater predictive power for Premier Farnell. The electronics firm saw a big recent spike in shares on loan to 4.4% of all shares and this is as high as it has been since the credit crunch. Results are on Thursday this week.
Not for the first time, the UK software company, Autonomy has seen a fresh annual high in demand to borrow. With 11% of total shares out on loan, short sellers seem increasingly convinced that the numbers will not stack up this year. This is especially interesting to witness given a general lack of insight into this company.
Sir Martin Sorrell’s WPP has suffered from a weak share price in recent weeks, perhaps due to Trinity Mirror reporting a 9% fall in advertising revenues at its national newspaper titles. Demand to borrow hit an annual high last week of 3% of total shares, but has already come down to take profits showing this could simply be short term trading opportunity rather than a long term trend. Also, if anyone has personal control over their company’s share price via their own charisma, it is WPP’s Chairman!