Slump in oil price hits WOR, page-46

Short sellers are like financial detectives, they hunt around for corruption and decay, and then back their sense of smell, by putting their money on the line. Even if you do not participate in short selling, it is as well to take notice of their positions.

On an even weighted week to week basis, I track the performance of the stocks in the ASX 100 that are shorted more than 5%. That weekly varying portfolio is down circa 26% (not considering dividends) relative to the XAO since the start of Oct last year. However the same moving selection, but based on the list of 70 stocks that was in the now defunct ASX CFD list was more or less flat relative to the XAO over the prior three years. So the shorters do not always win, not at least on the short side of their bets. Remember short sellers have to pay out any dividends as well as pay to borrow the stock. The couple of short positions I have had have ended in ignominy, not for the stock, but rather for me.

One thing I have learned is that, as a collective group, short sellers are patient. Some stocks have large short sold positions for long periods of time. eg MTS.

The one thing I do complain about is that the available data on the extent of short selling is not particularly timely and differences between short sold, borrowed and loaned figures, leave one to wonder just how reliable the reporting is.

Look on short sellers as somewhat unruly financial sniffer dogs. If they sit down beside a stock and wag their tails expectantly, there is good chance that something is up.