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Are the 10 most shorted shares on the ASX in your portfolio?

Each Monday I like to take a look at which ASX shares are attracting the most unwanted interest from short sellers.

When an investor decides to “short” a company’s shares, they are borrowing shares to sell on market with the aim of buying them back at a lower price further down the line.

As there are theoretically limitless losses, it is a high-risk investment strategy. But as we have seen many times this year, it can also be a rewarding strategy.

According to data provided by ASIC, these are the 10 most shorted shares on the ASX this week:

  • Orocobre Limited (ASX: ORE) continues to be the most shorted share on the ASX with 21.2% of its shares held short. Even though the lithium miner’s shares are down 27% year-to-date, some investors appear to believe they can fall further.
  • Western Areas Ltd (ASX: WSA) has seen its short interest fall to 15.5%. With nickel prices falling to a 10-month low last week, it’s not surprising to see short sellers target the leading nickel producer.
  • Syrah Resources Ltd (ASX: SYR) has short interest of 15.3%, down sharply from last week. Short sellers appear to be closing their positions following the release of a strong quarterly report from the graphite miner.
  • Vocus Group Ltd (ASX: VOC) has 14.3% of its shares in the hands of short sellers. This is a reasonably big increase on last week’s numbers. Vocus certainly looks to be good value at the current share price, but the rising short interest continues to be a concern.
  • Aconex Ltd (ASX: ACX) has 14.2% of its shares held short. Short interest in the software-as-a-service company has fallen sharply in the last couple of months. I think this could be a sign that investors believe the worst is behind the company now.
  • Myer Holdings Ltd (ASX: MYR) has continued to see short interest fall lower. The department store operator now has 12.6% of its shares held short. The prospect of a takeover offer from Premier Investments Limited (ASX: PMV) appears to have short sellers concerned.
  • Quintis Ltd (ASX: QIN) has 11.7% of its shares held short. This sandalwood plantation manager’s shares have fallen almost 22% since its business model was compared to a Ponzi scheme by a U.S. research firm.
  • Mayne Pharma Group Ltd (ASX: MYX) has 10.9% of its shares in the hands of short sellers. Whilst I still like the pharmaceutical company as a buy and hold investment, the rising short interest is a worry.
  • Nine Entertainment Co Holdings Ltd (ASX: NEC) has 10.7% of its shares held short. Despite the high levels of short interest the media company’s shares are up 23% year-to-date.
  • Domino’s Pizza Enterprises Ltd. (ASX: DMP) has 10.5% of its shares in the hands of short sellers. Short sellers appear to have taken an interest in the company following allegations that franchisees were not paying staff.

Finally, if you'd like to invest in shares with lower levels of short interest and explosive growth prospects then these fantastic shares could be just for you.

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The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Premier Investments Limited. Motley Fool contributor James Mickleboro has no position in any stocks mentioned. The Motley Fool Australia owns shares of ACONEX FPO and Vocus Communications Limited. 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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