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Jun 1, 2017

S3 Research: May 22nd – 26th Best and Worst Short Performers

Every week, S3 tracks short sellers’ equity positions in the US, revealing the trades that delivered positive results or missed the mark.  After tracking $873 billion worth of short positions, the above charts are a list of this week’s top five best and worst performing shorts.

Top 5 Best Performing Shorts:
• DY: Dycom Industries reported solid 3rd quarter earnings with EPS and revenues topping consensus estimates, but its growth was slower than expected and management’s EPS forecast was subdued. Dycom’s stock price fell 17.7% on the lower than expected sales forecast.
• HP: Helmerich & Payne, the largest short in the Oil & Gas Drilling Sector with $1.05 billion of short interest, fell  6.6% after Goldman Sachs downgraded the company to a Sell rating with a $45 price target due to an expected slowdown in oil rig growth this year.  
• AZO: Autozone Inc. hit a year-to-date low of $581.40 last week as 3rd quarter results missed EPS and revenue consensus estimates. With Amazon (AMZN US) elbowing its way into the Automotive Retail Sector, Carmax (KMX US), O’Reilly Automotive (ORLY US), and Autozone, the top three shorts in the sector, are beginning to see market share slip away to the online retail behemoth. 
• SIG: Signet Jewelers reported weak 1st quarter earnings, missing on both EPS and revenues, and saw its stock price fall 17.5% last week. The fourth largest short in the Specialty Retail Sector also had its credit rating cut by Fitch to BB from BB+ on weaker operating trends and the proposed sale of its consumer financing arm to pay down some of its existing debt load.
• ALXN: Alexion Pharmaceuticals hit a year to date low of $97.70 on Friday, dropping 15.35% for the week as JP Morgan downgraded the biotech company to Neutral from Overweight after a series of C-suite management changes by its new CEO Ludwig Hantson after an internal investigation of sales fraud in 2016. Alexion is also feeling the heat in its Saliris drug line, which were projected to generate $1.5 billion in peak sales but are having approval difficulties.

Bottom 5 Worst Performing Shorts:
• TSLA: Tesla, the largest equity short in the U.S. market, was up 4.8% last week as W.R. Baird reiterated its Outperform rating and a $386 target price, but added an upside of $500/share if the Model 3 hits target sales projections.
• BBY: Best Buy Co hit a year-to-date high of $61.25 on Wednesday after it reported better than expected 1st quarter results, beating its consensus EPS target by $0.20 and revenues by $220 million. Best Buy is the largest short in the Computer & Electronics Retail Sector, at $2.1 billion, and had a monthly increase in short interest of $257 million. Best Buy also issued upbeat full year guidance proving that its brick and mortar experience is able to withstand Amazon’s online onslaught.
• PBYI: Puma Biotech’s stock price soared 111% last week as the U.S. Food & Drug Administration posted a report which concluded that there was a statistically significant improvement in breast cancer patients who were treated with Puma’s neratinib drug verses a placebo.
• CHTR: Charter Communications, the second largest short in the Cable & Satellite Sector behind Comcast Corp (CMCSA US), saw its stock rise 6.86% last week. Shares gained steadily throughout the week as the stock may have bottomed out in its 10% retracement after hitting its year-to-date high of $348.80 in late April.
• NFLX: Netflix Inc., the largest short in the Internet Retail Sector, was up 3.5% last week as Piper Jaffray analyst Michael Olson reiterated his Overweight rating and said that Netflix’s long term revenue outlook may be undervalued as the firm expands into Europe and Asia. After increased spending on original programming negatively affected the bottom line in recent years, the large volume of shows is now providing zero-cost viewing opportunities for new international subscribers.

Want deeper insight into the above analysis? Contact:
Head of Research, S3 Partners
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 decision.

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