Energy

Oil prices rallied at the start of 2018 with WTI crude topping $66/barrel in late January. Short interest in the U.S./Canadian Oil, Gas & Consumable Fuel Sector tracked higher along with the price of crude, hitting a year-to-date high of $55.2 billion in mid-January. By the time WTI crude hit its year-to-date low of $58.98 on February 14^th, short interest in the sector had just hit its year-to-date low of $43.1 billion on February 12^th. Since hitting its lows, the price of WTI crude has risen 15% to $67.83 and short interest in the sector has increased by 27% to $54.8 billion. Oil & gas equity short sellers have been shorting into crude price strength and covering on price weakness.

We tracked $951 billion of short interest in the U.S./Canadian region and the top ten most and least profitable short trades for the month of February were:

• WMT After a rally which lasted for all of 2107 and stretched into January 2018, Wal-Mart’s stock price has been declining since it reported quarterly earnings which missed on profits, beat on sales and disclosed 2018 guidance below expectations.
• TSLA After hitting $357.42 in late February, Tesla’s stock price began to tumble as it nears its 200,000^th vehicle delivery which will mark the eventual phase out of the U.S. Government’s $7,500 tax credit.
• CVS CVS shares trended lower when the DOJ asked for more details on the CVS-Aetna merger. Even their strong quarterly results, which beat on earnings and sales, couldn’t reverse its 14% price drop in February.
• CMCSA Comcast’s share price took a hit when they disclosed a potential rival bid for Fox’s media assets, Disney has a $52 billion offer on the table, which would have to be topped.
• AMD After posting solid quarterly earnings, analysts fear that its crypto-mining based growth may be short lived and tenuous due to increased competition.
• CVX Chevron quarterly results met revenue expectations, but missed badly on earnings after backing out the effect of $2 billion of tax benefits.
• XOM Exxon Mobil reported lower than expected quarterly earnings due to a drop in demand for its refining business.
• GOOGL Alphabet had strong quarterly revenues, but earnings underperformed FactSet estimates by $0.28/share even though overall revenues increased by 24%.
• MDXG MiMedx is delaying the release of its 4^th quarter and 2017 full year earnings until it concludes an internal accounting audit. Later In the month reports arose that the DOJ was investigating the company’s sales and distribution practice, specifically regarding government contracts.
• AKRX Shares plunged after its acquirer, Freenius SE, announced that it was conducting an investigation into Akorn’s product development policies in relation to FDA date integrity procedures.

• SNAP Snapchat stock soared over 20% as its quarterly results handily beat expectations on both revenues and Daily Active User growth.
• GRUB Yum! Brand (YUM) announced a delivery partnership with GrubHub, extending GRUB’s reach across the country. YUM purchased $200 million of GRUB stock to formalize the agreement.
• NFLX Netflix signed Ryan Murphy, creator of American Horror Story, to a five year deal. NFLX is slowly inching towards the $300/share level which is increasing buying demand from momentum traders.
• TWTR Twitter reported its first profitable quarter, beating on both revenues and earnings but disappointing slightly on Monthly Active User growth.
• AAPL Warren Buffett’s Berkshire Hathaway (BRK) increased its Apple stake in the 4^th quarter 2017 to 169.6 million shares or $29.7 billion.
• EBAY Reported strong quarterly results and decided to end its payment processing relationship with PayPal and replacing it with Dutch firm Adyen. EBAY is looking to not only to reduce its payment processing costs but also control more of its operational footprint.
• LITE Reported strong quarterly earnings including an increase in overall sales, specifically in its 3D-sensing product line.
• AMZN Amazon began cost cutting measures with over 100 layoffs in its corporate workforce. Amazon is also looking to expand its retail footprint in the medical supply sector, an extension of its possible foray into the retail drug sector. The firm is also starting its own shipping service to compete with UPS for not only its own deliveries but also for their retail partners.
• MU Micron Technology reported strong earnings, reporting EPS and sales higher than previous guidance culminating with year-to-date earnings that could hit $10/share.
• QRVO Qorvo reporting better than expected quarterly earnings with slightly weaker short term guidance but stronger long term guidance.

Want deeper insight into the above analysis?

Contact: Ihor.Dusaniwsky@S3Partners.net

The Energy sector is broken up into seven sub-industries and total short interest in the sector is $78.0 billion and short interest was down $4.8 billion in the last month.

Short sellers were generally successful in the Energy Sector, with only one stock with year-to-date losses over $100 thousand.

Want deeper insight into the above analysis?

Contact:  Ihor.Dusaniwsky@S3Partners.net

Head of Research, S3 Partners

For more information on S3’s reporting, data and analytics solutions, email us at sales@s3partners.net