Once a week I like to take a look at ASIC’s short position report to see which shares investors are predicting will drop in value.
When an investor takes a short position they are effectively borrowing a company’s shares to sell on market in the hope of buying them back at a lower price in the future.
As it is a risky investment strategy short sellers will only open a short position if they have high conviction that the shares will decrease in value. Short sellers can be wrong as well as right and often shares that are heavily sold short can rocket higher if the companies being targeted post strong financial results for example.
Currently the 10 most shorted shares on the ASX as of October 17 are as follows:
- Myer Holdings Ltd (ASX: MYR) continues to be the most shorted share on the ASX with 16.2% of its shares held short. Although this is lower than last week, it is still close to its highest levels of this year.
- Worleyparsons Limited (ASX: WOR) has seen little change from last week and the mining services company continues to have short interest of 15%.
- Western Areas Ltd (ASX: WSA) has 12.9% of its shares held short, up slightly on last week. Short interest remains strong despite a 16% jump in global nickel prices in the third quarter.
- Bellamy’s Australia Ltd (ASX: BAL) is once again under fire from short sellers. The infant formula manufacturer has seen a slight increase in short interest to 11.9% this week.
- Metcash Limited (ASX: MTS) has 11.6% of its shares held short currently. Short interest in the wholesale distributor has remained flat on last week.
- Monadelphous Group Limited (ASX: MND) has seen a drop in short interest this week. Approximately 10.7% of the mining services company’s shares are held short, down from 11.2% last week.
- TFS Corporation Limited (ASX: TFC) has once again seen a rise in short interest. Short interest in the sandalwood plantation manager has risen to a new high of 9.2%.
- Alumina Limited (ASX: AWC) has 9.2% of its shares held short. Although this is a big drop from the beginning of the year, investors still appear to be quite bearish on the alumina and bauxite producer.
- Cover-More Group Ltd (ASX: CVO) has seen a sharp drop in short interest. The travel insurance provider now has 8.7% of its shares held short, down from 11.2% last week.
- Nine Entertainment Co Holdings Ltd (ASX: NEC) has climbed into the top 10 with 8.5% of its shares held short. This is the highest level so far in 2016.
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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.