• Research

Jun 26, 2017

S3 Research: June 19th – 23rd 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 $908 billion worth of short positions, the following is a list of this week’s top five best and worst performing shorts.

Top 5 Best Performing Shorts:
• CTL: Just as telecom giant Centurylink was getting a boost from their CEO succession plan as well as their Level 3 merger, they were hit by a $12 billion class action lawsuit on claims that the company encouraged a sales culture that falsely signed up customers for services they hadn’t requested.  Similar to the Wells Fargo Scandal, news of the allegations immediately triggered a nosedive in share price, as the company fell by more than 5% last week. Short investors were able to net $151.3 million in profits.  
• T US: AT&T fell 2.6% last week, closing at $37.95 on Friday. The telecom carrier was down 1.3% on Wednesday after Democratic US senators asked the Trump administration to block AT&T’s proposed acquisition of Time Warner for $108.7 billion on grounds that consumers would be harmed. In a letter to US Attorney General Jeff Sessions, 11 Democratic senators including Elizabeth Warren, Cory Booker, and Bernie Sanders cited their objections to the merger, stating that “…the combined company’s unmatched control of popular content and the distribution of that content will lead to higher prices, fewer choices, and poorer quality services for Americans…” If approved, the deal would merge one of the largest TV providers to one of the top entertainment companies.
• GE: General Electric dipped 5% last week, closing at $27.57 on Friday. The pullback was initially spurred by rumors that G.E. is in talks to sell its lighting business, its initial product line and foundation of its early business model. Additionally, a report that came out last week stating that G.E.’s pension was underfunded by $31.1 billion at the end of 2016—the biggest shortfall among S&P 500 companies. This trend of underfunding started after the 2008 financial crisis when G.E.’s pension portfolio plummeted 28%. Since then, the underfunded portion of G.E.’s pension has more than quadrupled.
• CMG: Chipotle had one if its largest single day price drops last week, dropping 7.3% on Tuesday and a total of 7.9% on the week. Higher advertising and cyber security costs have been eating away at the chain’s diminishing profit margins. In an effort to get customers in the door following several food poisoning incidents, Chipotle recently invested in its “As Real as it Gets” campaign, Chipotle’s largest and most expensive marketing campaign to date.
• CMCSA: Comcast, the most profitable U.S. short in 2017, with total mark to market profits of $956 million, was able to add another $112.1 million in profits for short investors after the company fell by 4.3% last week after analyst Craig Moffett at MoffettNathanson LLC downgraded the company from buy to neutral and lowered its price target to $45.

Bottom 5 Worst Performing Shorts:
• AMD: Semiconductor manufacturing giant Advanced Micro Devices was finally able to dethrone Tesla as the worst short performer of the week, with losses totaling just over $450 million after its price rose by nearly 24%. AMD launched its highly anticipated EPYC 7000 series processors last Tuesday. The chip received positive reviews, centering on the fact that it is more powerful than Intel’s x86 server processors, which caused Intel to fall by nearly 3% last week. AMD has also seen a major boost in sales due to the cryptocurrency rally, in which many people are using AMD’s processors to mine highly sought after crypto-currencies like Bitcoin and Ethereum.
• TSLA: Tesla, the most shorted U.S. equity with $11.3 billion in short interest, netted another $358 million loss for short investors last week, bringing YTD losses to $5.4 billion. Tesla’s stock price rose 3.2% last week, closing at an all-time high of $383.45. The likelihood of a China based Tesla production plant has investors seeing lower production costs and stronger inroads to the Chinese marketplace.
• CLVS: Clovis Oncology surged 58.4% last week, hitting an all-time high of $96.78 on Thursday following Monday’s announcement that its phase 3 trial of Rucaparib, an anti-cancer agent, was a success in treating patients with ovarian cancer. Following the news, analysts from JPMorgan, Credit Suisse, and Janney, raised their price target to $107 from $55, driving the price of Clovis even higher.
• AAPL: Apple, which was the last week’s best performing short, is recovering from the tech sell-off this past week as its price rose by 2.8%. This is more of an industry wide rebound lifting the industry leader’s stock price rather than specific news related buying.
• ORCL: Oracle enjoyed a 13% stock price increase last week, closing at an all-time high of $50.95 and causing short investors to lose $229.2 million. The biggest gain was last Thursday, when the price rose by 8.6% following Oracle’s Q4 results. Its adjusted revenue of $10.94 billion beat analyst expectations of $10.46 billion and its adjusted earnings of $0.89 per share beat analyst expectations of $0.78 per share. Much of its Q4 success can be attributed to its growing cloud computing service, which grew by 63%.  Several analysts raised Oracle’s price target to as high as $62.00.

Want deeper insight into the above analysis? Contact:
Ihor.Dusaniwsky@S3Partners.net
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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