Q: I would appreciate your comments on the following analysis that may explain recent weakness in the price of it shares.
The majority of investment analysts following Enbridge Inc. rate its stock a buy. But short sellers have a large position in the Calgary-based pipeline operator and natural-gas distributor. Why the divergence?
Enbridge has been on the Toronto Stock Exchange’s “Top 20 Largest Short Positions” table for more than a year. And during the two weeks ended Aug. 31, its short position recorded the largest increase of all the companies on the table, jumping 25 per cent.
Enbridge’s shares also trade on the New York Stock Exchange. There is a short position there, as well (that has increased). Adding the level for Aug. 31 to the Canadian position brings the total to 30.2 million, or 3.5 per cent of shares outstanding.
One of the few analysts to advise selling Enbridge shares is Darryl McCoubrey of Veritas Investment Research Corp. Why the sell advisory? “Specifically, the marked decline in crude oil prices … could undermine Enbridge’s growth profile and investment appeal,” he notes.
Enbridge’s revenue doesn’t depend directly on commodity prices but it does depend on volumes – similar to road toll booths. Mr. McCoubrey thinks the volumes could drop as oil producers shut down wells in response to low prices.
The majority of investment analysts following Enbridge Inc. rate its stock a buy. But short sellers have a large position in the Calgary-based pipeline operator and natural-gas distributor. Why the divergence?
Enbridge has been on the Toronto Stock Exchange’s “Top 20 Largest Short Positions” table for more than a year. And during the two weeks ended Aug. 31, its short position recorded the largest increase of all the companies on the table, jumping 25 per cent.
Enbridge’s shares also trade on the New York Stock Exchange. There is a short position there, as well (that has increased). Adding the level for Aug. 31 to the Canadian position brings the total to 30.2 million, or 3.5 per cent of shares outstanding.
One of the few analysts to advise selling Enbridge shares is Darryl McCoubrey of Veritas Investment Research Corp. Why the sell advisory? “Specifically, the marked decline in crude oil prices … could undermine Enbridge’s growth profile and investment appeal,” he notes.
Enbridge’s revenue doesn’t depend directly on commodity prices but it does depend on volumes – similar to road toll booths. Mr. McCoubrey thinks the volumes could drop as oil producers shut down wells in response to low prices.
