A great way to gauge the investor sentiment of a particular stock is to look at the percentage of the company's freely available shares that are sold short.
Shorting, also known as "to go short" or "short-selling" is one way in which investors can profit from a decreasing share price. Short selling is essentially the opposite to the long-term, buy low, sell high strategy, whereby the investor aims to sell the shares at a high price and re-purchase them later at a lower price, profiting from the difference.
A high percentage of shares sold short indicates that there are plenty of investors out there that believe the share price will fall. Here's a table of a recent top 10.
Top 10 Shorted Stocks
| Company | % of shorts |
| Myer Holdings Ltd (ASX: MYR) | 18 |
| UGL Limited (ASX: UGL) | 12 |
| Acrux Limited (ASX: ACR) | 12 |
| Metcash Limited (ASX: MTS) | 12 |
| Super Retail Group Ltd (ASX: SUL) | 12 |
| JB Hi-Fi Limited (ASX: JBH) | 11 |
| Atlas Iron Limited (ASX: AGO) | 10 |
| Regis Resources Limited (ASX: RRL) | 10 |
| Cochlear Limited (ASX: COH) | 10 |
| Cardno Limited (ASX: CDD) | 9 |
The table above paints an interesting picture about the way investors feel the market and individual stocks are heading. Retailers Myer, Super Retail and JB Hi-Fi have all been targeted as a result of recent earnings downgrades from competitors Kathmandu Holdings Ltd (ASX: KMD) and OrotonGroup Limited (ASX: ORL). Investors are betting on another tough year for Australia's retailers.
Similarly, Atlas, Cardno and UGL have been targeted as a result of the fall in the iron ore and oil price, and the likely deferral of projects and exploration. Until the price of key commodities recovers, it's unlikely that these short positions will reverse.
And then there are the one-offs:
Investors are concerned over the medium-term future of Acrux's ability to sell its testosterone supplement in the US and Europe following concerns that testosterone treatment can have adverse health effects.
Similarly, Cochlear's short-term share price outlook has been questioned following a strong run in 2014 and concerns that global competitors will take more market share in 2015.
Finally, Metcash has been in the top-10 since investors realised how competitive and crowded the local grocery and liquor market was becoming. Metcash's earnings appear to be in a long-term downtrend unless it can magically transform the competitiveness of its franchised store network.
Pick a stock with better sentiment
