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Are the 10 most shorted ASX shares in your portfolio?

Whilst the majority of investors are focused on buying shares which they believe will go up in value, there are investors out there doing the very opposite. Some investors will take short positions by borrowing shares to sell on market in the hope of buying them back at a cheaper price in the future.

Although it can be a lucrative investment strategy at times, it is a risky one with the potential for unlimited losses. Because of these risks I think investors should be cautious when it comes to investing in shares with high short interest.

Here are the ten most shorted shares currently on the ASX according to data provided by ASIC:

  • Orocobre Limited (ASX: ORE) continues to be the most shorted share on the ASX with 20.5% of its shares held short. The lithium miner’s short interest rocketed after it made a surprising and significant cut to its annual production guidance.
  • Western Areas Ltd (ASX: WSA) has seen its short interest fall to 15.5%. Short sellers appear to be targeting the company due to a sharp drop in the price of nickel futures in recent weeks.
  • Aconex Ltd (ASX: ACX) has 15.3% of its shares held short. Whilst I think the software-as-a-service company has an extremely bright future, its shares are certainly expensive compared to the market average.
  • Syrah Resources Ltd (ASX: SYR) has short interest of 14.8%. Short sellers continue to target the graphite miner despite it recently announcing that the commissioning of its Balama graphite project was on schedule.
  • Myer Holdings Ltd (ASX: MYR) has seen short interest fall to 12.8%. It appears that speculation of a takeover offer from Premier Investments Limited (ASX: PMV) has led many short sellers to close their positions.
  • Quintis Ltd (ASX: QIN) has 11.8% of its shares held short. Short sellers have been targeting the sandalwood plantation manager after its business model was compared to a Ponzi scheme by a U.S. research firm.
  • Vocus Group Ltd (ASX: VOC) now has 11.1% of its shares in the hands of short sellers. With its shares down 62% in the last 12 months, I feel it could be a great time to snap up shares despite the short interest.
  • Domino’s Pizza Enterprises Ltd. (ASX: DMP) has 10.7% of its shares held short. The pizza chain operator has been on the radar of short sellers since allegations of franchisees mistreating and underpaying their employees emerged.
  • Nine Entertainment Co Holdings Ltd (ASX: NEC) has 10.7% of its shares held short, down again from a week earlier. Despite the high short interest, Nine Entertainment’s shares are just a fraction off their 52-week high.
  • Metcash Limited (ASX: MTS) has 10% of its share in the hands of short sellers. Despite this the wholesale distribution and marketing company’s shares have rallied 28% in the last 12 months.

Finally, if you're not a fan of investing in shares with high levels of short interest then I would highly recommend an investment in one of these high-flying blue-chip shares. I'm tipping each of them to smash the market this year.

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Motley Fool contributor James Mickleboro has no position in any stocks mentioned. The Motley Fool Australia owns shares of ACONEX FPO. 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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