Three cheers, but Senex keeps champagne on ice

A week ago, Ian Davies and his Senex Energy team held a quiet celebration to mark the company's market value rising above $1 billion.

A week ago, Ian Davies and his Senex Energy team held a quiet celebration to mark the company's market value rising above $1 billion.

It coincided with Senex's inclusion by Standard & Poor's in the S&P/ASX300 as part of a quarterly rebalancing of the ASX indices. Insider suspects Senex's rise has more to do with its position in the flavour-of-the-month coal seam gas industry.

Being moved in, or out, of an ASX index by S&P can dictate whether funds managers are allowed to invest in a particular stock. Inclusion is often treated as a victory, because it is hoped it will improve a group's chances of getting on the radar of institutional investors. The flip side is that companies dropped from an index are also likely to be sold from investment portfolios.

Insider's analysis of how stocks added and subtracted from the S&P/ASX 300 this month (the changes were announced on March 2 and came in a fortnight later) suggest that punting on the changes would be a long way short of lucrative.

Happily, that also suggests that if fund managers do make wholesale adjustments to their portfolios based on S&P's rebalancing efforts, they are either doing it gradually or (even better for the beneficiaries of super funds) being choosy about which stocks in which to invest rather than just slavishly hugging the index.

Senex would appear to be one of two stocks that have both joined the index and enjoyed significant price rises this month - the other was Buru Energy, which has doubled in value. Buru's shares hit $3.58 yesterday, and the company's value is now well over $800 million four years on from its $30 million float.

When Insider spoke to Senex's Davies the other day, he was pleased about the inclusion but not going overboard. After all, he still has to deliver on the growth path set last year to prove and produce its unconventional energy assets.

It earned almost $2 million in the December half-year thanks to conventional oil production from the Cooper Basin in South Australia, where its share of production went from 12,000 to 200,000 barrels, and is expected to hit 700,000 barrels before the end of this financial year.

As for Buru, its rise in worth would seem to have little to do with being in an index, and everything to do with finding the new Ungani onshore oilfield in Western Australia's Canning Superbasin. Having Mitsubishi of Japan as a backer probably has not hurt either. At any rate, of the other 21 stocks added to the index this month, about half have fallen in value, many have barely shifted and the gains have been negligible.

On the other side of ledger, most of those dropped from the index have not moved hugely, and a couple such as Skilled Group and STW Communications have had reasonable if not spectacular rises.

HANDING OVER

A week ago Peter Robinson, the chairman of troubled chemicals and consumer products company Symex Holdings, was topping up his holding in the face of losing managing director Greg Tremewen.

Yesterday fellow director and kingmaker in the Symex boardroom, Alan Johnstone, bought 3 per cent of the company, lifting his total stake beyond 15 per cent.

RBS Morgans and Macquarie Equities appear to have handled the buy and sell sides of the Symex dealings, which might not have been huge but at least would have generated some brokerage.

It was difficult not to notice that the only half-dozen trades in Symex shares yesterday that could have accounted for Johnstone's purchases correspond almost exactly with the 6.58 million or so shares attributed to Tremewen through Linford Nominees.

Tremewen declared the stake on March 14 when he gave notice because he had to quit the board the same day. That means that even though he has not officially left the premises at Symex, he will not have to reveal if he has sold out.

While Insider would never quibble about a company being prompt in advising of a change in a director's holding, it was impressive to see that Johnstone had disclosed his purchases by 5.46pm last night - well within the five-day window allowed under ASX listing rules.

SHORT STORIES

Hedge funds are far more sensitive flowers than Insider thought, judging by a note penned to a colleague over a report they had been big winners out of the David Jones price fall.

Kim Ivey, president of the Alternative Investment Management Association, wanted to set the record straight on why the upmarket retailer suddenly had downmarket shares after its results and strategy release. He reckoned that "as in 2007 and 2008, shares prices of companies that implement inappropriate business strategies will be adjusted for perceived new risk by the market" - which Insider thinks translates as "if we reckon you have stuffed up, we will short-sell your shares".

Ivey went on to say that alternative investment strategies are now a recognised investment class for superannuation fund managers, so the real winners from shorting DJs are the workers whose funds shorted the stock.

"The other winners in this DJS event may also be the investors who saw the build-up in short positions in DJS stock and took it as an early warning signal to avoid making an investment," Ivey said.

Even better, as the short-sellers cover back their stock by buying in the market, they provide an exit avenue for ordinary investors who still want to quit the DJs register in uncertain times.

See, short-selling is good for everyone.

imcilwraith@fairfaxmedia.com.au

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