Short selling has become an increasingly popular strategy among professional fund managers as they attempt to profit from falling share prices.

Although the strategy is more expensive and risky than traditional investing strategies, the potential for quick gains makes it very attractive. For example, Vocus Communications Limited (ASX: VOC) has provided short sellers with a gain of more than 30% in just two days.

Investors need to keep in mind that short sellers generally only target shares that they believe have a strong chance of falling and this means the reasons for the short interest must always be determined before investing in a share that is a target.

Nonetheless, short sellers often get it wrong and this can work in the favour of investors who can benefit from a ‘short squeeze’ as the ‘shorters’ are required to buy back the shares.

With that in mind, here are two heavily shorted shares that I think could defy the short sellers over the next 12 months:

Bellamy’s Australia Ltd (ASX: BAL)
Source: www.shortman.com.au

Source: www.shortman.com.au

Short interest in the infant food company has risen steadily over the past 12 months as short sellers bet that the recent changes to Chinese import laws will negatively impact sales. So far, the commentary from Bellamy’s has been upbeat and any impact from the changes is expected to be short lived in any case.

Interestingly, a2 Milk Company Ltd (Australia) (ASX: A2M) recently provided a positive trading update that suggested sales into Asia have not been impacted as badly as some had predicted. If Bellamy’s reports a strong first half result in February, I think investors should be prepared for some strong share price gains as short sellers cover their positions.

Mantra Group Ltd (ASX: MTR)
Source: www.shortman.com.au

Source: www.shortman.com.au

Mantra shares have seen a rapid increase in short interest after the accommodation provider announced a large Hawaiian acquisition earlier in the year. Concerns about the impact of Airbnb have compounded the situation and this has resulted in more than 8% of its shares in the control of short sellers.

Despite this, Mantra has recently come out and noted that Airnb was actually having little impact on the occupancy levels and pricing at most of its hotels. The company also re-affirmed its full year guidance at its AGM and highlighted a number of new properties that should help to drive growth over the medium term.

On top of the potential for the share price to rebound, investors will also get the benefit of a growing dividend which is expected to yield around 4.4% over the next 12 months.

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Motley Fool contributor Christopher Georges owns shares of MANTRA GRP FPO. The Motley Fool Australia owns shares of A2 Milk and 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.