Short-sellers have done well over the August reporting season with many of the most short-sold S&P/ASX 200 (Index:^AXJO) (ASX:XJO) stocks losing ground after disappointing investors with their results.
But there could be a new favourite stock emerging for these bearish traders who make bets on stocks they think will fall in the shorter term.
Short-sellers borrow stocks to sell on-market in the hope of buying it back at a lower price later to close their position and crystallise their profit (or loss if the share price rallies instead of drops).
The hot ASX stock to short-sell?
The stock that could make a good target is listed international fund manager Platinum Asset Management Ltd (ASX: PTM) as Morgan Stanley believes there is a 70% to 80% chance of the stock underperforming the market over the next 60 days.
The PTM share price may have fallen around 10% over the past year but the broker thinks it's anything but cheap and believes it's at risk of being downgraded by other brokers.
"While the stock has de-rated to ~15xFY20E P/E, PTM remains too expensive given the level and direction of outflows. August saw the net outflow run-rate accelerate to ~17.5% annualised (A$407m outflows), well above our forecast for 12% outflow run-rate in 1H20E," said Morgan Stanley.
"We are ~5% below consensus FY20E EPS, as we think the Street is underestimating the risk of outflows, lack of growth options, need to invest in the brand to protect the retail back book and limited cost flexibility elsewhere."
The $407 million in outflows last month is a large step-up from the $108 million outflows in July 2019. Morgan Stanley has an "underweight" recommendation on the stock with a price target of $3.35 a share.
Lots of room for short-sellers
What's more, short-sellers haven't really been paying much attention to Platinum Asset Management. The percentage of its shares that were short-sold stood at 2.8% as of September 4, 2019, according to the latest ASIC data which is always a week behind.
That is an uptick of around 48 basis points over the month but that's nothing compared to the near 300 point increase in short-interest for stocks like the GWA Group Ltd (ASX: GWA) share price, oOh!Media Ltd (ASX: OML) share price and Webjet Limited (ASX: WEB) share price.
Further, there's plenty of room for short-sellers in Platinum Asset Management. Its level of short-selling interest is modest compared to this group of stocks where the total proportion of shares short-sold is as high as 11% for household goods maker GWA, 8.1% for outdoor advertising group oOh!Media and 5.6% for online travel booking site Webjet.
