S3 Analytics: January 13th – January 19th Best and Worst U.S./Canadian Short Performers

Every week, S3 tracks short sellers’ equity positions in the US and Canada, revealing the trades that delivered positive results or missed the mark.  After tracking $953 billion worth of short positions, the following is a list of this week’s top five best and worst performing equity shorts.

TSLA Tesla Inc. posted a record $619 million loss in the last quarter as the Model 3’s production problems continue to eat into the firm’s bottom line. TSLA’s stock price dipped below $300/share last week after hitting a year-to-date high of $385/share less than two months ago. TSLA is still the largest equity short in the U.S. market and 3^rd largest worldwide short trailing only two Hong Kong/Chinese stocks, Alibaba Group ADR (BABA) and Ping An Insurance Group (2318 HK). Tesla short sellers are still down $3.2 billion in mark-to-market year-to-date losses even after they recouped almost $400 million in profits last week.

EVHC Physician serviced and surgery center Envision Healthcare Group’s stock declined 38% last week as third quarter EPS came in at $0.73 verses estimates of $0.88 even though revenues surged through the $3 billion level. EVHC is the 6^th largest short in the Health Care Services Sector and shares shorted have doubled in 2017. Short sellers have had a profitable 2017, up $503 million, or 76%, in 2017 as shorts have been building their positions as the stock’s price has been declining for most of the year.

UAA Under Armour Inc. hit its year-to-date low of $11.61 last week as it reported mixed third quarter results and lowered full year EPS forecasts substantially. CEO Kevin Plank also reinforced Under Armour’s North American revenue problems due to competition from Adidas and Nike and a tepid product mix by reducing growth projections to a “single digit percentage rate.” UAA short sellers are up $772 million in year-to-date mark-to-market profits this year as the stock is down 58% in 2017.

THS Treehouse Foods Inc.’s stock price fell 38% last week as it missed third quarter profit estimates and lowered fourth quarter EPS guidance over 20%. THS’s share price has been dropping steadily since it hit its year-to-date high of $89.94 on April 17^th and should continue to see weakness with its CEO Robert Aiken resigning after just four months on the job and several analysts downgrading the stock.

NWL Newell Brands Inc. reported third quarter results which missed on both EPS and revenues. Newell’s stock price is down 25% on the news. Newell Brands is the fourth largest short in the Household Durables Sector (behind Garmin, Sharp and Whirlpool) with short interest decreasing from its year-to-date high of $1.07 billion in early October. Short sellers were not expecting weak third quarter results as they covered 3.5 million of their short shares in the weeks before the earnings announcement.

AAPL Apple Inc., the largest short in the Technology Hardware & Equipment Sector and the sixth largest equity short in the U.S. market, saw its share price rose 6% last week as iPhone X demand may outstrip near term supply. Even as Apple’s market cap nears $900 billion short sellers have maintained their exposure to the stock, buying back shares to keep their exposure at $5 and $7 billion for most of the year. Unlike most momentum or value based shorts, a large percentage of AAPL short interest is made up of derivative hedges and downside market “insurance” which explains why short interest trended in a $5 billion to $7 billion range for most of the year. Shorts are down $2.1 billion for the year.

INTC Intel Corp. hit its year-to-date high of $47.10 last week and BMO Capital upgraded the stock to market outperform. The chipmaker has improved its position in the AI market, including a partnership with Facebook in developing its Nervana Chip. Intel is also looking to manage the expense side of its business better, looking to bring down expenses as a percentage of revenues to 30% from 34%. Intel continues to be the largest short in the Semiconductor Sector, ahead of Nvidia Corp, Microchip Tech and Qualcomm. Intel shorts are down $1.15 billion in year-to-date mark-to-market losses in 2017.

BDX Becton Dickinson & Co. hit a hear-to-date high of $224.41 last week as third quarter EPS and revenues beat expectations. BDX is the largest short in the Health Care Equipment Sector, ahead of Intuitive Surgical, Stryker Corp and Medtronic. BDX is up 34% on the year, and short sellers who have increased their exposure from $600 million in January to $2.8 billion, are down $381 million in year-to-date mark-to market losses.

QCOM Qualcomm Inc.’s stock price rose over 13% last week as rival Broadcom Ltd. is looking into a deal to acquire Qualcomm. The deal, which was originally valued at $90 billion, has quickly ramped up to $130 billion. Qualcomm is the sixth largest short in the Semiconductor Sector with 23.7 million shares shorted worth $1.2 billion. Qualcomm short sellers were still up $256 million in year-to-date mark-to-market profits as of last Friday. With Qualcomm’s stock price expected to soar into the $60’s, most or all of those profits may quickly disappear.

MU Micron Technology Inc.’s stock price hit a year-to-date high of $44.38 last week as DRAM demand, fueled by smartphone and data center usage, continues to rise and supply remains limited. Even though Micron’s stock price is up 97% in 2017 short sellers have continued to build their short exposure. Short interest has climbed from $1.2 billion in January to $2.2 billion today. Shorts are down $1.1 billion in year-to-date mark-to-market losses this year.

Want deeper insight into the above analysis?

Contact: Ihor.Dusaniwsky@S3Partners.net

Managing Director Predictive Analytics, S3 Partners, LLC

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The information herein (some of which has been obtained from third party sources without verification) is believed by S3 Partners, LLC (“S3 Partners”) to be reliable and accurate. Neither S3 Partners nor any of its affiliates makes any representation as to the accuracy or completeness of the information herein or accepts liability arising from its use. Prior to making any decisions based on the information herein, you should determine, without reliance upon S3 Partners, the economic risks and merits, as well as the legal, tax, accounting and investment consequences, of such decisions.