We review how short sellers are reacting to the companies due to announce earnings in the week to come.

• Trina Solar is the most shorted company ahead of results despite recent talk of a shortage of solar panels
• Norwegian salmon producer Marine Harvest sees the largest jump in short interest ahead of earnings after the Russian import ban
• Australian and Honk Kong firms make up the most shorted Asian firms ahead of earnings, led by Weichai Power

North America

The second quarter earnings season starts to slow down next week,with fewer than 200 firms seeing any demand to borrow ahead of results. On the heavily shorted side, there are 20 firms seeing more than 6% of their shares out on loan.

Trina Solar sees itself as the most shorted company announcing earnings in North America this week with 23% of the company’s ADR line currently out on loan. This heavy demand to borrow comes despite recent rumours of a possible shortage of solar panels, as global installations are expected to swell by nearly a third according to a recent Bloomberg report. Shorts have held the course in this name despite the recent improving pricing power of solar manufacturers with demand to borrow climbing 11% in the last four weeks.

Another interesting short ahead of results is Smith & Wesson which is the second most shorted company announcing results this week. The fact that rival Sturm Ruger saw a fall in income from the previous year in its latest earnings will only embolden short sellers which have nearly doubled their positions in the last 12 months.

The company seeing the largest surge in demand to borrow is chicken manufacturer Sanderson farm which has seen short interest surge by a third in the four weeks leading up to results. The company now finds itself with the largest amount of short interest in over two and a half years despite a recent buoyant share price, as analysts are forecasting a strong rise in results.

Europe

Europe sees relatively robust earnings activity next week with 17 firms seeing 5% or more of their shares out on loan ahead of results.

Topping the list as the most shorted firm ahead of results in the region is cancer care firm Elekta which has 27% of its shares out on loan, making it the most shorted company announcing earnings globally. Elekta has been no stranger to short sellers recently, and its disappointment results last time it announced earnings has seen short increase their positions to new all-time highs over the last three months.

Another firms seeing extremely high demand to borrow is Gemalto which has 21.4% of shares out on loan. The secure payment firm has seen heavy demand to borrow over the last 12 months.

The company seeing the largest surge in shorting activity ahead of results is salmon producer Marine Harvest which has seen shorts surge in the wake of Russia’s recent ban on European food imports. While the recent ban came too late to impact the firm’s current quarter, analysts have trimmed their forecasts for Marine Harvest’s upcoming quarter as Russia was responsible for a small but growing portion of the firm’s revenue.

In the UK, Petropavlosk has seen shorts rebound in recent months.

Asia

Asia also sees plenty of earnings activity with 20 firms seeing more than 7% of shares out on loan ahead of earnings.

Hong Kong-based and Australian firms split the list of the most shorted firms in the lead up to results.

Hong Kong is led by Weichai Power which has 18% of its shares out on loan. The recent set of downbeat PMI numbers have seen shorts increase their borrow of Weichai shares by over a fifth in the last four weeks to the highest level in over two years.

Another firm seeing a high increase in short interest in the lead up to results is Yanzhou Coal which has seen demand to borrow shoot up by 16% in the last month. No doubt driving this surge in shorting activity is the recent announcement by the Chinese government that it intends to phase out coal power generation in the Beijing area over the coming years.

In Australia, metals and mining shares and their support industries are the key focus of short sellers with Atlas Iron leading the pack with just under 15% of shares out on loan.

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Simon Colvin | Associate Director, IHS Markit

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This article was published by S&P Global Market Intelligence and not by S&P Global Ratings, which is a separately managed division of S&P Global.