Travel sickness – negative investor sentiment towards travel stocks ahead of results
The main UK travel stocks are due to report earnings this week. We highlight strong short interest in some of these stocks alongside others exhibiting interesting investor sentiment including; Thomas Cook Group (LON:TCG), TUI Travel Plc (LON:TT), Easyjet (LON:EZJ), FirstGroup (LON:FGP), CSR Plc (LON:CSR) and Serco Group (LON:SRP).
Travel giants Thomas Cook Group and TUI Travel are due to report earnings this week and are both ranked amongst the top 20 FTSE All Share stocks seeing the highest amount of stock on loan. Investor sentiment towards Thomas Cook, which is reporting its first quarter earnings, is distinctly negative. Despite the shares recently falling to annual lows, short interest has risen to an annual high of 10.6% of total shares outstanding on loan.
TUI Travel will follow Thomas Cook with interim results on Tuesday. Short sellers were quick to cover their short positions in TUI Travel as the share price showed signs of recovering in early April. Short interest has since fallen from 9.55 to 7% of total shares outstanding on loan, which is still three times higher than the average across the FTSE All Share Index. It is key to note that TUI Travel may be subject to arbitrage due to its convertible bond.
Easyjet Plc is also reporting interim results on Tuesday. Ahead of its earnings the company has reported a 35% jump in passenger traffic for April, which follows a slump in traffic last year due to the volcanic ash crisis. Short interest has increased from 0.5% to 2% of total shares outstanding on loan since February, as the shares fell to annual lows in April.
Back on terra firma, bus and rail operator, FirstGroup Plc is due to report preliminary 2011 earnings. The shares have fallen around 20% since January during which time short interest has increased from 4.5% to 7.5% of total shares outstanding on loan. Reports by Reuters that the UK’s competition commission is set to investigate the bus and transport industry about market concentration concerns only add to the weight of negative sentiment facing this sector.
In an unrelated sector, CSR Plc is due to report first quarter earnings this week. Short interest in this wireless technology provider reached an annual high of 17.5% of total shares outstanding on loan in February as the share price also peaked. Since then, short sellers have aggressively covered their positions, with short interest having fallen to 7.8% of total shares.
Finally, Serco Group, a provider of business services with exposure to the UK Government sector is due to report preliminary 2010 earnings. Although its share price has flat lined since November, short interest has halved from an annual high to 4% of total shares outstanding on loan.
