Caterpillar (CAT) Shorts Calling it Quits After Humbling Performance - S3 Partners

S3 Partners Head of Research Ihor Dusaniwsky notes declining short-interest positioning in Caterpillar (NYSE: CAT), citing a $1 billion decline in notional bearish positions, in the face of positive trending shares, up 24% in 2017.

The bullish trend became more pronounced yesterday, as CAT rallied nearly 6% following a robust second quarter earnings report, with management raising the full year 2017 outlook, costing shorts $117 million in mark-to-market losses. CAT bears were already suffering from $187 million in mark-to-market losses, prior to the 2Q earnings announcement, thus bringing total performance for 2017 to -$304 million in mark-to-market losses or -12% return.

Short-sellers from 2012 to 2016 were incrementally increasing their short-position in CAT every year, while the company faced slowing demand for mining and agricultural machinery, amid global commodity and agricultural headwinds. Bearish notional positioning in CAT peaked in October 2016, with the election of President Trump and his economic policies in November 2016, forcing more defined trend of short-sellers decreasing their bets.

Dusaniwsky further explains the challenges facing CAT short-speculators, commenting "Caterpillar has seen buying pressure from long shareholders buying stock on the back three straight quarters of increased revenues, but also additional buying pressure from short sellers who covered over 15 million shares of their short positions throughout the year. Shorts still need to cover 5 million shares to get back to short interest levels seen in 2009-2012."

Source: www.S3partners.net

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