If an investor believes that a share price will go up in value they can buy its shares. Alternatively, if an investor thinks a share price is overvalued and will fall in value they can choose to “short” its shares.
By shorting a company’s shares they are borrowing shares to sell on market, with the aim of buying them back at a cheaper price in the future.
As it is a risky strategy with potentially limitless losses, I believe it is prudent to keep a close eye on shares with high short interest. As it may be a sign that their share prices are about to take a tumble.
The 10 most shorted shares as of November 7 according to data provided by ASIC are as follows:
- Myer Holdings Ltd (ASX: MYR) continues to be far and away the most shorted share on the ASX. The retailer has 17.5% of its shares held short.
- Western Areas Ltd (ASX: WSA) has 14% of its shares held short. The nickel producer has seen a small increase in short interest since this time last week.
- Worleyparsons Limited (ASX: WOR) has seen short interest fall for a second week in a row. The mining services company has short interest of 13.8% this week.
- Bellamy’s Australia Ltd (ASX: BAL) has also seen short interest fall this week. 11.8% of the infant formula manufacturer’s shares are in the hands of short sellers.
- Aconex Ltd (ASX: ACX) is once again being targeted by short sellers. 11.1% of the software-as-a-service company’s shares are now held short.
- Nine Entertainment Co Holdings Ltd (ASX: NEC) has seen short interest hit a new high for a second week in a row. The media company has short interest of 11.1%.
- Metcash Limited (ASX: MTS) has 10.8% of its shares held short. Short interest in the wholesale distributor has once again remained flat week on week.
- Monadelphous Group Limited (ASX: MND) has 10.3% of its shares held short. Short interest in this mining services company has remained flat since last week.
- Alumina Limited (ASX: AWC) has short interest of 9.8%. This is a slight increase on last week for the alumina and bauxite producer.
- G8 Education Ltd (ASX: GEM) is a new addition in the top 10 after the childcare operator saw a sudden surge in short interest. 9.5% of G8 Education’s shares are in the hands of short sellers.
It is worth remembering that this data is based on last Monday’s statistics. Considering the post-election rally and surging commodity prices, I wouldn’t be surprised to see some major changes to short interest levels next week.
Finally, if you would like to invest in shares without high short interest then these rapidly growing shares could be just the ticket.
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Motley Fool contributor James Mickleboro has no position in any stocks mentioned. The Motley Fool Australia owns shares of Bellamy's Australia. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
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If an investor believes that a share price will go up in value they can buy its shares. Alternatively, if an investor thinks a share price is overvalued and will fall in value they can choose to ?short? its shares.
By shorting a company?s shares they are borrowing shares to sell on market, with the aim of buying them back at a cheaper price in the future.
As it is a risky strategy with potentially limitless losses, I believe it is prudent to keep a close eye on shares with high short interest. As it may be a sign that their share prices…