Power, Coal & Gas Utility - Industry News
| Investors pile short bets on most heavily shorted power, gas, coal stocks |  |
November 02, 2009 6:42 PM ET
By Jay Hodgkins and Jack Chen
|  Related Companies | Related Articles |
Investors jumped back into short bets on some of the already most shorted stocks in the SNL Energy coverage universe in the first half of October. Short bets seemed to ramp up altogether in the energy space as investors prepared for what many analysts expected to be a lackluster quarterly earnings season for the sector. Among power and gas stocks, PNM Resources Inc. and Black Hills Corp. had the highest percentages of new shares sold short from Sept. 30 to Oct. 15, and both landed squarely among the top 10 most shorted power and gas stocks. 
Short positions on PNM Resources stock jumped 230 basis points in the first half of October, leaving 8.26% of the company's outstanding stock sold short. In total, nearly 2 million additional PNM Resources shares were sold short during the period. Investors increased their short bets on Black Hills stock by 151 basis points to 10.23% of shares outstanding, making Black Hills stock the third-most-shorted power or gas stock by percentage in the SNL Energy coverage universe. While short bets on Dynegy Inc. stock increased only third-most among power and gas stocks by percentage, short bettors sold almost 6.4 million additional shares of Dynegy stock short in the first half of October, by far the most additional shares sold short of any power, gas or coal stock. Despite the heightened short betting on some already relatively heavily shorted power stocks, most power stock prices increased moderately during the period. However, since Oct. 15, many power stocks, such as PNM Resources and Black Hills, fell below their Sept. 30 levels. The largest decreases in percentage of shares shorted among power and gas stocks were not as dramatic as the largest increases, with not a single stock seeing the net number of shares sold short drop by more than 100 basis points. 
Short bets on RRI Energy Inc. stock fell 85 basis points to 3.74% of shares outstanding, as investors cashed in a net of roughly 3 million shares sold short. RRI shares held roughly flat from Sept. 30 to Oct. 15 at a touch above $7, but the decision to cash in short bets during the period looked less solid by Oct. 30, when RRI shares had dropped to $5.27. Investors closed out about 2.5 million short bets on PG&E Corp. stock, a drop of 68 basis points, leaving 1.64% of the company's outstanding shares held short. Ahead of Black Hills, the most shorted power and gas stocks by percentage during the period were CMS Energy Corp. and Mirant Corp.. 
CMS continued to stand as the most shorted power or gas stock in the SNL Energy coverage universe with 12.18% of shares sold short, while 10.36% of Mirant shares were sold short as of Oct. 15. As with power and gas stocks, some of the most shorted coal stocks also saw the biggest increases in percentage of shares sold short from Sept. 30 to Oct. 15. 
Patriot Coal Corp. is now the most shorted coal stock by nearly 3 percentage points after investors increased short bets on the stock by 173 basis points to 14.86% of shares outstanding. The bounce-back in short bets came on the heels of investors decreasing short positions held on the stock by 360 basis points. Massey Energy Co. joined Patriot as one of four coal stocks in the SNL Energy coverage universe with more than 10% of shares held short after investors increased their short bets by 135 basis points in the first half of October. Despite the increase in shares sold short, Massey stock increased from a close of $27.89 on Sept. 30 to $33.37 by Oct. 15, but settled back to $29.09 by Oct. 30. Not all heavily shorted coal stocks continued toward heavier shorting, however. Short bettors cashed in shares of Arch Coal Inc. stock sold short by a net of 137 basis points in the first half of October, leaving 12.10% of the company's outstanding shares held short. The U.S. Army Corps of Engineers in a Sept. 30 letter denied a U.S. Environmental Protection Agency request to suspend a permit for Arch Coal's Spruce No. 1 mine permit and on Oct. 5 asked for another 30 days to respond to a plaintiff motion for summary judgment that would stop further valley fill work at the mine. | 
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