A major step forward for mankind in recent years is the impossibility of getting lost or being late. I exaggerate but with amazing mapping technology in our mobile phones and cars it has become very easy to get directions. Satellite navigation enables cars to drive themselves to your destination and has gone from being an army/geographer’s tool to the best friend of every taxi driver in the world. So how are investors positioned in the companies behind this breakthrough? We will look at short interest in TomTom (AMS:TOM2), Garmin (NASDAQ:GRMN), DTS (NASDAQ:DTSI), Qualcomm (NASDAQ:QCOM) and Google (NASDAQ: GOOG).
Dutch listed TomTom (TOM2) had a very bad 2008. The global financial crisis coincided with their EUR 2.9bn purchase of TeleAtlas and led to the need to issue new shares to pay off debt and support the viability of this sat nav business. Short sellers were not immune to these tribulations and this has been the most often shorted of all the Dutch stocks.
At present, the recent price rebound from 4 to 6 EUR has led to some short covering but short interest remains high at 10% of the shares in issue. In August this stood at almost 13%. Recent results were not good compared to this period last year and this was blamed on the weakened dollar since the US is a big customer. Other headwinds according to UBS analysts are the year on year decline in revenue for personal navigation devices (PND) as more and more people use the “free” functionality on their smart phones. The other big question is what Google (GOOG) plans to do in this area. Other analysts at JPMorgan Cazenove think the “in-dash” car navigation market will more than make up for falling PND income since they can dominate the onboard navigation for mid priced vehicles which lack this technology currently. General Motors own a service called Onstar believing that drivers want access special advisors as opposed to mapping.
On the positive side, institutional investors who lend own nearly 8% of the company, which is close to a three year high. Tom Tom have a mapping application for Apple’s iPhone and are making good progress at including up to the minute traffic information using their TeleAtlas technology for new smartphone players like HTC– and Google still use TeleAtlas to power their European maps.
The market leader for sat nav devices is Garmin (GRMN). Long only funds who lend decreased their holdings in Garmin in July while short sellers also covered at the same time. Short interest in Garmin stands at 9% and with low volume, it would take 12 days to close out positions.
While on the subject of in-car devices it is interesting to see the partnership between Audi (owned by Volkswagen VW) and Qualcomm (QCOM) to be able to offer 3G high speed data connectivity for inbuilt internet features like Google Earth and other real time data services for car use. Drivers of their super luxury A8 car will use Qualcomm’s wizardry to offer their passengers wi-fi for their personal devices too! Short selling in QCOM is very low and falling while funds who lend own 26% of the shares in issue, which has hovered at around this level for the past two years.
DTS (DTSI) sells surround sound systems for an array of products including cars. It remains 10% shorted but was as high as 22% short two years ago. There has been lots of short covering but there remains plenty more to come and it would take 25 days to cover all of it due to low volume.
