Although the majority of investors want share prices to climb higher, not all investors feel the same way. Short sellers look to profit from declining share prices by borrowing shares to sell with the aim of buying them back at a cheaper price down the line.
This is certainly a high risk strategy with the potential for unlimited losses as stock prices move higher after a short seller makes an incorrect call.
For this reason short sellers will only tend to short shares that they have a high conviction may fall. In light of this I feel it's interesting to take a weekly look at what companies 'the shorts' are targeting. Although remember for every seller there is a buyer so which way these companies head in the short term is really anyone's guess.
The 10 most shorted shares on the ASX as of Oct 24 according to data supplied by ASIC are as follows:
- Myer Holdings Ltd (ASX: MYR) is yet again the most shorted share on the ASX. Short interest in the retailer continues to rise, with 16.4% of its shares held short this week.
- Worleyparsons Limited (ASX: WOR) has seen a slight decline in short interest this week. 14.6% of the mining services company's shares have been shorted, down from 15% this time last week.
- Western Areas Ltd (ASX: WSA) has 14.1% of its shares held short, up from 12.9% last week. If nickel prices continue to rise I expect short interest will quickly decline.
- Bellamy's Australia Ltd (ASX: BAL) has seen short interest rise to 12%. It would appear as though some investors are expecting infant formula sales into China to struggle. I wouldn't bet against Bellamy's.
- Metcash Limited (ASX: MTS) has 10.9% of its shares held short currently. Short interest in the wholesale distributor has dropped slightly since last week.
- Nine Entertainment Co Holdings Ltd (ASX: NEC) has seen a sharp rise in short interest. 10.5% of its shares are held short, up from 8.5% last week.
- Monadelphous Group Limited (ASX: MND) is another mining services company being targeted by short sellers. 10.5% of its shares are being held short. With mining companies cutting back on capex, it's not a surprise to see it in the list.
- Alumina Limited (ASX: AWC) has 9.5% of its shares held short. Short interest has been rising slowly in the last few weeks, which could be a sign that investors are becoming more bearish on the alumina and bauxite producer.
- TFS Corporation Limited (ASX: TFC) continues to see a rise in short interest. Short interest in the sandalwood plantation manager has risen to a new high of 9.5%.
- Aconex Ltd (ASX: ACX) is a new addition to the top 10 with 8.7% of its shares held short. But with investor sentiment on the cloud collaboration software provider turning positive following a strong quarter, I wouldn't be surprised to see short interest drop quickly.
