At the start of each week I like to take a look to see which shares the bears are currently piling into. To do this I use ASIC's short position report which reveals the percentage of a particular company's shares that have been shorted.
When investors short shares they are borrowing shares to sell on market with the aim of buying them back at a cheaper price. Although short sellers don't always get it right, in my opinion rising short interest should be seen as a warning sign that a share price could be about to come down.
For this reason it can be prudent to keep a close eye on changes in short interest. Currently the 10 most shorted shares on the ASX as of October 10 are as follows:
- Myer Holdings Ltd (ASX: MYR) is yet again the most shorted share on the ASX with 16.3% of its shares held short. The department store operator has been one of the most shorted shares on the market all year.
- Worleyparsons Limited (ASX: WOR) has seen a jump in short interest week on week to 15%. With the mining services company's shares up 97% this year, short sellers may believe it has climbed too high too fast.
- Western Areas Ltd (ASX: WSA) has 12.3% of its shares held short. Short interest has started to reduce in recent weeks as nickel prices improve.
- Bellamy's Australia Ltd (ASX: BAL) is once again a favourite of short sellers. The infant formula manufacturer has seen a slight rise in short interest this week to 11.5%.
- Metcash Limited (ASX: MTS) has 11.4% of its shares held short. Although it still remains relatively high, short interest in the wholesale distributor has been slowly reducing over the last few months.
- Monadelphous Group Limited (ASX: MND) is another mining services company being targeted by short sellers. 11.1% of its shares are currently held short.
- Cover-More Group Ltd (ASX: CVO) has seen a reduction of short interest this week. 10.3% of the travel insurance provider's shares are in the hands of short sellers currently.
- Flight Centre Travel Group Ltd (ASX: FLT) has seen a reasonably sharp drop in short interest. Just 9.1% of its shares are held short now. This is the lowest level all year, which could be a bullish sign for the travel agent operator.
- TFS Corporation Limited (ASX: TFC) is the exact opposite of Flight Centre. Its short interest has been rising slowly in the last few months and at 9.1% is now at the highest level all year. This could be a bearish sign for the sandalwood plantation manager.
- Alumina Limited (ASX: AWC) has seen short interest remain relatively steady at 9%. This is a big improvement on the start of the year when the alumina and bauxite producer had around 15% of its shares held short.
