I just received an email from VanEck which has a systematic ETF strategy that goes long and short ASX 300 companies and rank them based on a quantatitive screening process. Using their words, their process is as follows:
"ALFA’s investment process takes an investment universe of Australian equities, based on their liquidity and investability. Each company in the investable universe is scored based on the many thousands of simulations and calculations. The investment process identifies the top companies with the highest probability of yielding excess returns from the investable universe and the bottom companies with the highest probability of underperforming the benchmark. The result is a concentrated portfolio that targets a range from 15 to 50 long positions and up to 25 short positions."
They then cited two examples, Teliz and Neuren. The reasons to long TLS or short NEU appear to be nothing related to the companies fundamentals. Their score is based on items such as interest paid, accounts receivables, operating income, foreign income loss and total inventories.
Such example also gives an insight as to why short interest has increased so much given the mass amount of money flowing into ETF strategies. Given these reasons contributing to the increased in shorts, I am much more comfortable holding my long NEU position.
NEU Price at posting:
$13.20 Sentiment: Buy Disclosure: Held
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