Short sellers betting against Bill Gross and Janus

Fixed income guru Bill Gross may attract headlines, but many traders are betting that he won’t be able to help his new employer.

Janus Capital Group, which welcomed Gross in September, has seen a 7 percent increase over the past month in its percent of shares outstanding on loan, according to data from Markit. This represents a bet that the company’s stock price will fall, despite the addition of the famed manager.

Jim Young | Reuters Bill Gross

Jim Young | Reuters
Bill Gross

“There’s clearly a debate about what the impact of Mr. Gross being added to the platform will be,” said Jefferies analyst Daniel Fannon, who has a buy rating on the stock and a price target of $17—well above the $14.36 Janus closed at on Monday.

Gross announced he was leaving Pimco, the firm he helped found, in September amid claims that he was about to be fired. The group, owned by Allianz, has suffered huge outflows since then from its flagship Total Return Fund.

As for what inflows Gross will be able to bring to Janus, Fannon said that many investors may be taking a wait-and-see approach.

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“People are going to want to see how [Gross] does and make sure the infrastructure is there for him before they write checks,” Fannon said.

But Gross may even have an impact beyond Janus’ fixed income business because he has brought positive attention to the group, Fannon added.

Janus may begin to see Gross’ influence in its fourth quarter, but his real effect will not be clear until next year, Fannon said. Still, the bond expert may not be able to bolster the company’s bottom line, as its equities products have largely lagged behind their benchmarks recently.

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Short sellers covered their bets against Janus in the first days after the Gross announcement, but they have since gone back in, Markit analyst Simon Colvin said. With the 7 percent one-month increase, Janus now has 20.3 percent of its shares outstanding on loan.

Janus is the seventh most-shorted North America-traded stock reporting earnings this week, according to Markit.

Here’s the full Markit list:

Most shorted ahead of earnings: Week of 10/20/2014

% Shares Outstanding on Loan
1 Month % Change
Earnings Date
Jetblue Airways JBLU 30.5 5% Transportation 10/23/2014
World Acceptance WRLD 27.1 -6% Diversified Financials 10/22/2014
Hercules Offshore HERO 23.7 4% Energy 10/24/2014
Irobot IRBT 22.9 -6% Consumer Durables & Apparel 10/21/2014
Jakks Pacific JAKK 21.6 -4% Consumer Durables & Apparel 10/23/2014
Wesco International WCC 20.9 8% Capital Goods 10/23/2014
Janus Capital Group JNS 20.3 7% Diversified Financials 10/23/2014
Lumber Liquidators Holdings LL 20.0 23% Retailing 10/22/2014
Theravance THRX 17.4 5% Pharmaceuticals, Biotechnology & Life Sciences 10/24/2014
Verisign VRSN 17.0 -3% Software & Services 10/23/2014
Altisource Portfolio Solutions ASPS 16.9 14% Real Estate 10/23/2014
Hawaiian Holdings HA 16.3 1% Transportation 10/21/2014
Diamond Offshore Drilling DO 15.3 12% Energy 10/23/2014
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