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.
