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

At the start of each week I like to take a look to see which shares the bears are currently piling into. To do this I use ASIC’s short position report which reveals the percentage of a particular company’s shares that have been shorted.

When investors short shares they are borrowing shares to sell on market with the aim of buying them back at a cheaper price. Although short sellers don’t always get it right, in my opinion rising short interest should be seen as a warning sign that a share price could be about to come down.

For this reason it can be prudent to keep a close eye on changes in short interest. Currently the 10 most shorted shares on the ASX as of October 10 are as follows:

  1. Myer Holdings Ltd (ASX: MYR) is yet again the most shorted share on the ASX with 16.3% of its shares held short. The department store operator has been one of the most shorted shares on the market all year.
  2. Worleyparsons Limited (ASX: WOR) has seen a jump in short interest week on week to 15%. With the mining services company’s shares up 97% this year, short sellers may believe it has climbed too high too fast.
  3. Western Areas Ltd (ASX: WSA) has 12.3% of its shares held short. Short interest has started to reduce in recent weeks as nickel prices improve.
  4. Bellamy’s Australia Ltd (ASX: BAL) is once again a favourite of short sellers. The infant formula manufacturer has seen a slight rise in short interest this week to 11.5%.
  5. Metcash Limited (ASX: MTS) has 11.4% of its shares held short. Although it still remains relatively high, short interest in the wholesale distributor has been slowly reducing over the last few months.
  6. Monadelphous Group Limited (ASX: MND) is another mining services company being targeted by short sellers. 11.1% of its shares are currently held short.
  7. Cover-More Group Ltd (ASX: CVO) has seen a reduction of short interest this week. 10.3% of the travel insurance provider’s shares are in the hands of short sellers currently.
  8. Flight Centre Travel Group Ltd (ASX: FLT) has seen a reasonably sharp drop in short interest. Just 9.1% of its shares are held short now. This is the lowest level all year, which could be a bullish sign for the travel agent operator.
  9. TFS Corporation Limited (ASX: TFC) is the exact opposite of Flight Centre. Its short interest has been rising slowly in the last few months and at 9.1% is now at the highest level all year. This could be a bearish sign for the sandalwood plantation manager.
  10. Alumina Limited (ASX: AWC) has seen short interest remain relatively steady at 9%. This is a big improvement on the start of the year when the alumina and bauxite producer had around 15% of its shares held short.

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

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