Every week, S3 tracks short sellers’ equity positions in the US, revealing the trades that delivered positive results or missed the mark. After tracking $832 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:
• AAPL: Apple’s stock price fell $5.22, down 3.36%, on May 17th as fear that President Trump’s tax reforms may be delayed. Apple has $240 billion in offshore cash that is subject to a 35% tax if repatriated back into the U.S., the proposed reduction in tax rate to 10% would save Apple $60 billion in taxes and spur more stock buybacks and a possible increase of its 1.63% dividend.
• BAC: Bank of America is the largest short in the Diversified Banking sector but its 2017 returns have outperformed the rest of the top-ten most shorted stocks in the sector as well as the KBW Bank Index. With President Trump’s tax cuts and deregulation policy delayed and possibly in danger of not materializing in 2017, BAC’s stock price fell almost $1.00 this week.
• NFLX: Netflix is becoming more of a thorn in the film establishment’s side with two highly acclaimed movies hoping to vie for Palme d’Or honors. Unfortunately for Netflix, the Cannes jury is fighting back against the internet streaming giant by restricting consideration for any awards only to films that appear in French cinemas. According to French law, a movie cannot be streamed online until three years after its general release, thereby not allowing Netflix original media to be seen by French Netflix subscribers.
• CSCO: Cisco reported 3rd quarter earnings that did not “wow” investors with an EPS beat by $0.03 and revenues by $40 million as well as a year-on-year increase in operating cash flow. Unfortunately, revenues declined year-on-year for the 6th straight quarter and 4th quarter guidance was well below expectations. In addition to reporting sub-par quarterly results, Cisco also plans to cut an additional 1,100 staff in order to lower expenses.
• MNK: Jim Chanos of Kynikos Associates affirmed his short positions in drugmaker Mallinckrodt PLC and pharmacy benefits manager Express Scripts Holding (ESRX US) at the SALT conference. Chanos expressed a “murky alliance” between the two companies and MNK’s Althar drug which may, according to Chanos, become a target of a congressional review on excessive pricing. In addition to Chanos, both Andrew Left of Citron Research and David Einhorn of Greenlight Capital are also MNK short sellers. MNK short interest is up $259 million, or 56%, this year and after this week’s price decline generating short sellers $103 million in revenues, shorts are now up $60 million for the year, or 7.6%.
Bottom 5 Worst Performing Shorts:
• WB: Chinese language social media platform provider Weibo Corp ADR reported strong 1st quarter results with both EPS and revenues beating analyst expectations and its stock price hitting a historical high of $79.04 on May 18th. Weibo reported a 28% increase in daily active users and with this growth expected to continue throughout the year they are upgrading their 2nd quarter guidance $10-$20 million above earlier expectations.
• ATHN: Athenahealth’s stock price increased to over $130/share for the first time since July 2016 as Elliott Associates disclosed a 9.2% stake in recent 13D filings. Paul Singer believes the stock is undervalued and is looking to put forward “numerous” operational and strategic opportunities to the board. ATHN is the second largest short in the Health Care Technology sector behind Cerner Group and its recent stock move may trigger some of the $1.1 billion of shorts to cover their positions.
• TSRO: Tesaro Inc. is the third largest short in the Biotechnology sector and its stock price increased $6.74, or 4.6%, on high trading volumes this past week on news that its post-chemotherapy nausea and vomit reducing drug Varubi’s sales rose 55% in March. Sales of Varubi make up 70% of Tesaro’s revenues.
• KMX: Wedbush upgraded Karmax to outperform and increased its price target to $70 on reduced fear that its credit risk would be adversely affected a trend of lower used car prices and increased loan defaults by lower tier borrowers. KMX is presently the 2nd largest short in the Automotive Retail sector.
• PBYI: Puma Biotech’s stock price gained as interim data for its drug neratinib has shown promise in breast, biliary and cervical cancer studies and that results from the upcoming FDA advisory panel are, according to RBC analyst Matthew Eckler, “tilted in neratinib’s favor”.
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.