These five ASX resources and energy stocks are ‘short squeeze’ opportunities, Fintel says
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Developed by investment data firm Fintel, the Australian Short Squeeze Leaderboard ranks companies with the highest ‘short’ interest, so traders can easily identify companies with the highest negative sentiment by institutional investors.
Short sellers borrow a stock (for a fee) and then sell it, expecting it to fall in value. They buy back the stock at some point and return it to the original owner.
If the stock falls, they pocket the difference.
This Aussie leaderboard is also useful for identifying potential ‘short squeeze’ opportunities, Fintel says.
A short squeeze occurs when a shorted stock’s price goes up instead of down, forcing the short sellers to buy it at a higher price to prevent even bigger losses.
This buying momentum forces prices even higher.
The Most Shorted Stocks Australia uses an advanced quantitative model to determine which companies have the highest likelihood of experiencing a short squeeze, Fintel says.
“This model is a proprietary, multi-factor model that uses a number of factors, including Short Interest % Float, Short Borrow Fee Rates, and others.”
The scoring model ranges from 0 to 100, with 100 being most likely, relative to its peers.
Below is Fintel’s list of most-shorted Australian companies as of October 10, 2021 at 11:00pm EST.
Cooper is a $450m market cap South Australian oil and gas explorer and producer which generates revenue from gas supply to southeast Australia.
Cooper Energy tops this week’s list with a score of 95.26, Fintel says.
“The cost to borrow COE shares is 1.07% and the total float shorted is 7.99%, the highest of this week’s list,” it says.
“Official ASIC figures indicate raw short interest is 123.8M shares as of October 4, barely moving from previous reports.
“At current trading volume, short sellers would require 31 days to cover their positions.”
There were no big surprises to the final deal, with Oil Search shareholders set to receive 0.6275 new Santos shares for each OSH share they own, giving them about 38.5% of the merged company.
Santos is number two on this week’s list with a score of 94.93, Fintel says.
“Like Cooper Energy, the company’s cost to borrow is a modest 1.07%, but the total float shorted is elevated at 6.95%,” it says.
“However, raw short interest has increased significantly over the last few reports, climbing from 84M shares at the end of September to 129M shares last week, an increase of 52% in under a month.”
De Grey Mining could be on track to deliver Australia’s largest new gold mine since AngloGold’s ‘Tropicana’ almost a decade ago.
A scoping study on De Grey’s 9Moz Mallina gold project — which contains the intrusive Hemi gold deposit and its 6.8Moz resource — shows it would produce 473,000oz of gold a year for the first five years of operation and 427,000ozpa over an initial 10-year mine life.
De Grey Mining is third on this week’s list with a score of 94.04, Fintel says.
“The cost to borrow De Grey shares is 2.4% and the total free float shorted is 4.27%,” it says.
“Raw short interest is 40.8M shares, up just 2% over the last month.”
New Hope’s production fell at its east coast coal assets from 11.3Mt in 2020 to just 9.6Mt in 2021 but saw its underlying EBITDA soar by 78%, from $290 million to $367 million.
It swung from a $157 million loss to a net profit after tax of $79 million, backing a final dividend payment of 7c and a full year dividend total of 11c a share.
CEO Reinhold Schmidt said both improved prices for thermal coal and cost discipline underpinned the result.
New Hope has a short squeeze score of 93.70, Fintel says.
“New Hope has the highest cost to borrow of this week’s list, coming in at 3.45%,” it says.
“Total shorted float is 5.19%. Raw short interest is 25.5M shares, which is slightly down over the month.
“Based on current trading volume, it would take short sellers 7.94 days to cover.”
The share price of BPT, one of the four major producers on the ASX next to Woodside, Santos and Oil Search, got smashed in May when it reported about a 4% reduction in net reserves.
Beach Energy is last on this week’s top 5 list with a short squeeze score of 93.66, Fintel says.
“The company has the lowest cost to borrow, coming in at 0.96%,” it says.
“The total float shorted is 7.32%, second only to Cooper Energy this week. Raw short interest is 113M shares.
“Raw short interest has been climbing steadily month over month since mid-September, where it was just 94M shares.
“This represents an increase of 20% since September, indicating a long, sustained, and increasing negative outlook for the company.”
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