shorters, page-9

FYI - received this email a while ago:

I don’t like the fact that JBH is the biggest short bet that the market is making here at the moment. The shorters have actually increased their bet since our insto sales team ran these numbers last September. It doesn’t instill a great deal of confidence and it’s basically saying that a particular area of the market is taking a very dim view of JBH’s business model. This could be backed up by the first attached article in the AFR on Monday quoting Gerry Harvey….even after JBH’s recent falls, the market cap of JBH is still $1.15Billion….is it really worth this much in the current environment??...Their primary asset on the balance sheet is their trading stock or inventory, fixed assets and their brand name (an intangible) which is offset by their short-term payables and long-term debt….that gets you to about $150m in shareholders equity vs a current market cap of $1.15Billion (that’s approx. 7.5x to book)….in the current environment the brand (the intangible) is just not generating the same level of profitability as it has in the past or in past cycles….store growth has been JBH’s model, the store growth has led to increased profitability but now we are at the juncture where store growth is not increasing profitability, it might be increasing sales but they’re not increasing profit….this could be it’s turning point and the second attached article quotes Gerry Harvey again stating that HVN have no plans to open a major new store domestically for the first time in their 30-year history…..JBH are on track to open 16 new stores in FY12, with 10 open to date and a further 6 planned in this 2H12…..this all costs money and it’s being paid out of increased borrowings which is making me very cautious/weary….might pay to sit on the sidelines and await earnings clarity….

Just did a quick rundown again on the top shorts again by % of float….as a general comment besides retail, the short positions look to have come down a little.

A couple of names that have disappeared out of the top 30 ERA, BSL, LEI, ALL, AQA

Company Name 12/30
JB Hi-Fi Ltd 21.94
Myer Holdings Ltd 12.66
Fairfax Media Ltd 12.23
Harvey Norman Holdings Ltd 11.58
Billabong International Ltd 11.35
Wotif.com Holdings Ltd 11.13
David Jones Ltd 10.72
Flight Centre Ltd 10.63